As we continue to deal with the economic impact of the coronavirus, business and governmental leaders are struggling to shore up lost revenues and get back on the path to fiscal health. I would like to argue here that local leaders should consider municipal green bonds, which can offer the ultimate triple play:
- Saving money for our local municipalities through energy efficiency and renewable energy projects that provide positive cash flow;
- Providing better returns for investors in these times of very low interest rates; and
- Supporting the local economy and creating jobs through local projects funded through the green bond program.
For more than 200 years, municipal bonds have served as a financial resource for projects in the United States that benefit the public good. According to Bloomberg, U.S. state and local governments have issued $15.3 billion municipal green bonds since 2010.
Green bond projects qualify under the Green Bond Principles, launched by an international group of financial institutions in 2014 and updated in March of 2015, which include the following project types: renewable energy; climate change adaptation; energy efficiency; clean transportation; biodiversity conservation; sustainable land use; and more.
With many of our local municipalities endorsing or considering targeted renewable energy goals, green bonds are an excellent way to fund these efforts. The issuance of municipal green bonds offers an opportunity to relieve some of the economic pressure and lost jobs due to the coronavirus – just as President Frank D. Roosevelt’s New Deal brought about economic relief and put people back to work (as well as a number of less tangible benefits, such as restoring faith in the U.S. economy and reviving a sense of hope for citizens). With solar energy and other energy efficiency projects earning returns well above the cost of capital (many projects earn 5-7% or more, while green bonds are often paying only 1-2%), municipal green bonds can offer near immediate cash flow benefits, while at the same time reducing fossil fuel use, and providing local jobs.
And, of course, it would take our community in the right direction the fight against climate change. With concerns about rising temperatures and sea levels – especially in Florida, where both are significant issues – working toward sustainability through investments in environmentally-friendly projects offers the perfect opportunity to showcase socially responsible government.
If you agree, I encourage you to contact your local elected officials and ask them to consider this approach to bolstering our economy, putting people back to work, and supporting projects that show a commitment to fight climate change. Find your elected officials here.