More companies prefer green bonds, carbon taxes

Apple
Apple and other companies are increasingly turning to green bonds and innovative financing to fund clean energy and efficiency. Here, a worker traverses s floating solar panel array near Nagoya, Japan.

Companies that are serious about reaching aggressive emission-reduction targets are increasingly turning to green bonds, and in some cases an internal carbon tax, to pay for energy and water efficiency upgrades and renewable energy projects, according to experts who appeared at GreenBiz 18 on Tuesday.

More companies are tapping green bonds to pay for projects that will save them money on  power bills and show customers and investors they're serious about  climate change, said Ariana Meinz, debt capital markets associate at Bank of America said Tuesday, during a panel discussion on green financing.

In a recent example, Apple issued green bonds on two occasions. The first was $1.5 billion in green bonds and other debt. A Bank of America analysis found that more investors were interested in the green bond tranche, and less so in the other bonds.

This past June, Apple issued $1 billion of green bonds to fund renewable energy, in a demonstration of “how a tech company can make huge commitments to clean energy and make the front page of the Wall Street Journal, and signal that this is something they’re involved in and interested in,” she added.

Apple’s green bond issuance came less than two weeks after President Donald Trump announced that he would pull the United States out of the Paris climate agreement.

Green bond issuances are expected to exceed $200 billion this year, up from about $155 billion in 2017, according to a January report by S&P.

Citi recently closed a deal with a Fortune 100 company to swap out old lighting with LEDs at facilities in multiple locations, across multiple states, said Davida Heller, vice president of corporate sustainability at Citi.

The financing will help the company get new equipment, and they’ll pay Citi and another investor every month, in amounts that when added to the company’s electric bill, will be less than what it was paying its utility before the project.

“The fact that now this Fortune 100 company is able to pay a reduced rate and not have to worry about the capital costs really frees them up on the corporate sustainability side and the treasury side in innovative ways,” she added.

Microsoft, a global leader in reducing emissions and buying renewable energy, has an internal carbon tax that pays for many efficiency and renewable energy projects, said Liz Willmott, carbon program lead at Microsoft.

The company levies carbon taxes on its energy-heavy operations, at a rate of roughly $5 to $10 a ton of carbon dioxide equivalent, and sustainability teams can use that money to invest in efficiency and clean energy projects.

 Microsoft’s carbon tax applies to electricity consumption and onsite emissions such as diesel generation and onsite usage, and air travel.

“We estimate the funds needed to achieve carbon neutrality and count that against the CO2 tonnage,” she added.

As for the banks, they are now branching out into other types of socially responsible investments for bonds.

Starbucks has issued two sustainability bonds since 2016, and similar types of bonds have been issued out of Europe, said Meinz, of Bank of America.

“That’s the place where I think things are going to go,” she added.