It's David vs Goliath as Hartford in Connecticut (pop. 124k) and New York City (pop. 8.4m) race to be the USA's first Green City Bond issuer

Since September’s highly successful California and Massachusetts green bonds there has been lots of talk of cities beginning to issue. The most likely starters at the moment would seem to be Connecticut’s Hartford(population 125,000) and New York City(population 8.4 million) – a David vs Goliath battle for first out.

We’re still waiting for more details to be published around proposed green bonds, but we do know:

  • New York’s Controller Scott Stringer published a proposal for green bond issuance in September. The list of categories for eligible projects is long, and includes both climate change mitigation and adaptation categories: clean water, energy efficiency in buildings, wind and solar energy generation, river revitalization and preservation, habitat restoration, flood mitigation, sustainable agriculture, forestry and land use, waste management, waste-to-energy and clean transportation.
  • Hartford, Connecticut, is planning to issue a US$140m, 28-year (but early redeemable) bond, rated AA. Proceeds will be invested in upgrading waterways under the city’s ongoing US$2.1bn Clean Water Project, and to refinance bonds where proceeds have been funding the Clean Water Project. The repayment of the bonds will partially be covered by an increase in charges for water use.

Of course we have already seen green bond issued by a city-affiliated entity in the US. In July Washington D.C.’s water utility, DC Water, issued green water bonds. Looking forward, the City of San Francisco’s Public Utilities Corporation is known to be looking at doing a green bond.

The potential for Green City Bonds is huge. Cities need vast amount of investment both for climate change mitigation and adaptation: They account for around 70% of emissions, but they are also vulnerable to climate change impacts such as storm surges. There is a range of possible structures for Green City Bonds: issuers can be city governments or city-affiliated entities, like utilities or corporations in public-private partnerships, or national governments or development banks can issue green bonds with funds earmarked for green projects in selected cities.

The first green bond from a city was issued by Swedish city of Gothenburg just over a year ago.

But it’s the US that has the world’s largest municipal bond market, with huge potential to make it green. It’s just a question of whether it’ll be a David or a Goliath issuing first.