Assessment of Green Municipal Bonds

Features favourable for municipalities

Features NOT favourable for municipalities

  • It enables municipalities to provide socially beneficial and environmentally responsible projects and, at the same time it provides both financial returns for investors and environmental and other benefits for state and local governments.

  • Relatively fast way of obtaining funds for investments

  • Positive social effects

    • Direct access to the capital market.

    • Lower financing costs.

  • Transparent financing that assures investors the funding will be used exclusively for green projects.

  • Good alternative to conventional financing. Municipalities can use successfully implemented examples, especially in the financing of PV and wind farms, as a model. Citizens can participate in the projects in the form of bonds and participate in their success

  • If citizens aren´t ‘touched’ by the topic – e.g. refurbishment of the schools of their children touches them emotionally and creates willingness to finance the works

  • Municipality as the green bond issuer needs to understand the whole complex process of issuing green bonds before entering into a transaction.

  • Hardly suitable for small municipalities

  • Legal constraints of municipalities concerning borrowing financial sources

Types of EE projects or EE services suitable to be financed this way

  • Infrastructure modernization or other EE related projects intended to benefit local communities like:

  • sustainable waste management

  • sustainable land use

  • biodiversity conservation

  • clean transportation, clean water, and various climate adaptation projects

Recommendations for deployment

  • As the green municipal bond market is growing, it is important that issuers understand the process of issuing green bonds before entering into a transaction.

  • Identifying and qualifying green projects and assets - municipalities, city governments, and states should first define the kind of green projects they seek to support with green bonds, while clearly stipulating that the proceeds from the green bond sale would be earmarked for green projects or assets.

  • Evaluating the creation of a taxable green bond programme - connection of green bonds to tax deductions is very helpful to make them more attractive.

  • Trainings for municipalities on the benefits and formalities related to green municipal bonds, using the experience of partners who implemented the method

  • Creating a handbook showing step by step the formalities related to the issue