The water authority in Washington D.C. is trying to raise money for environmental projects through the sale of green bonds.
"The District of Columbia Water and Sewer Authority is preparing to sell $300 million of debt that won't be paid back until 2114, the first sale of so-called 'green bonds' that will carry a 100-year maturity," the Wall Street Journal reported, citing a person familiar with the deal.
The money raised by this sale will be allotted to projects such as a drainage system to keep stormwater and sewage out of rivers, the report said. "A bond is considered 'green' if proceeds are earmarked for environmentally friendly uses," the report said. "No previous green bond has carried a 100-year maturity, according to data provider Dealogic."
Mark Kim, the chief financial officer for the D.C. water authority, explained some of the specifics. He said the bond deal "will be marketed not just to green-bond investors, but also to traditional buyers of 100-year bonds such as insurance companies and pension funds," the Journal reported. "Officials plan to meet investors in New York, Boston and maybe some other cities to drum up interest in the bonds."
“The structure of this transaction offered a lot to the market,” Kim said, per Bloomberg. “It was a very highly rated credit coming into this space in very favorable market conditions." Check out the bond documents here.
The market for green bonds is new and expanding quickly, according to The Economist.
"Occasionally a market appears out of nowhere. So it is with 'green bonds,' instruments which tie the proceeds of a bond issue to environmentally friendly investments. Issuers of green bonds raise money, promising to spend it on (for example) building wind farms or less-polluting factories," the report said.
About $3 billion of green bonds were sold in 2012. Now that figure is up to $20 billion for just the first half of 2014, the report said.
"All green bonds are investment grade; many have been two or three times oversubscribed; half were issued by companies, a switch from 2013, when most green bonds were sold by international agencies such as the World Bank," the report said.
Image credit: "DVC00348," courane01 © 2005, used under an Attribution 2.0 Generic license: https://creativecommons.org/licenses/by/2.0/
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