"Green Bonds" are a relatively new trend in the bond
market. They offer investors an opportunity to invest in
"green projects" that help mitigate climate change.
Categories of green projects include renewable energy, energy
efficiency, sustainable waste management, sustainable land use and
biodiversity conservation. Green Bonds have similar features to
regular bonds and can be issued on a tax exempt basis (if certain
criteria are met). The market eventually hopes that Green Bonds
will receive favorable pricing because more investors will be
seeking out such socially conscious investments in order to be
viewed as good global and environmental citizens.
Initially, one of the issues with Green Bonds was that there was
no independent assessment system to allow investors to review the
probability that the project being financed with Green Bonds would
achieve positive environmental outcomes. This type of assessment
was a concern, especially of institutional investors that normally
purchase Green Bonds, since they want to track the environmental
impact of their investments. However, in March, 2016, Moody's
Investors Service rolled out methodology for the Green Bonds
Assessment ("GBA") and recently provided its first GBA of
a bond to be issued in the United States. The Upper Mohawk Valley
Regional Water Finance Authority (in New York) is issuing bonds
(the "Bonds") to finance and refinance improvements for
increased capacity and improvements to the treatment plant and
pumping and regulating stations to assure safe drinking water. The
Bonds received a rating of GB1 which is the highest rating provided
under the GBA. The GBA is determined based upon five factors:
organization; use of proceeds, disclosure of use of proceeds;
management of proceeds; and ongoing reporting and disclosure on
environmental projects financed or refinanced with bonds. In the
case of the Bonds, the Mohawk Valley Water Authority
("MVWA") was found to be effectively organized and
properly staffed and has previously disclosed information on its
projects though its annual comprehensive financial reports and
through its website. In addition the MVWA has committed to track
the net proceeds of the Bonds and provide disclosure regarding the
environmental benefits. The disclosure will be done based on
certain key metrics identified by Moody's in order to permit
comparative analysis in the future.
The GBA is one more step forward in promoting Green Bonds in the
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