1. The UK's Green Deal legislation went through Parliament this week - Hurrah! It allows residential retrofit loans to be repaid via electricity bills, and ties the loan to the house rather than householder. It will significantly reduce the risks of default, eventually allowing investment grade (climate) bonds to be issued against portfolios of these loans. It's a model that will need to be adopted in other countries if we're going to reduce emissions from the housing sector - but, it won't by itself solve the problem of take-up. That's the separate problem of 'adoption' (we're working on it).
2. The world's second largest fund manager launched a Green Bond fund this week - it's big news when the elephants start to move! State Street Global Advisors (SSgA) Global CIO Rick Lacaille even said "The market for green bonds in Europe could reach as much as $1.4 trillion dollars by 2020". SSgA have taken a deliberative approach to the new fund, holding "Green Bond Summits" in Boston and London to talk through ideas (the Climate Bonds Initiative has been involved in both events). Green bond funds will allow investors the chance to signal their preference for investments that address climate change. We expect governments to then move to preference such investments. At this stage the SSgA fund is focusing on green bonds from international financial institutions. We do hope they will use the Climate Bond Standards in future to allow corporate and other bonds to be considered as well; in the meantime, it's a great development.
3. The EU confirmed yesterday that its new "Project Bonds 2020" guarantee facility was going ahead. See http://goo.gl/abOS2 and http://goo.gl/LHslr. To be managed by the European Investment Bank, the facility will be used to credit-enhance project bonds that finance cross-border transport and power infrastructure (and help create an EU-wide power network). It's a good example of intelligently using public sector funds to leverage capital investment quickly. But it's not a green infrastructure fund and will be used to support investments in things like motorways as well as trains - and more likely the latter because those applications have already been prepared and are ready to land on the usually passive EIB's desk. The problem is that to meet EU emission reduction targets we should be focusing these efforts on investments consistent with targets - which would at least mean avoiding investments that will lead to an increase in emissions and preferably preferring investments that will help reduce them. Train, yes, inter-country grid to support renewable plug-in, yes, motorways, no no no. Let nations fund those themselves.
