By Alex Liftman, Global Environmental Executive at Bank of America
Years from now, 2015 may be seen as the tipping point for when the world began to address climate change in a truly meaningful way. It was the year that set new records for clean energy investment, the year emissions held steady even as the global economy grew and the year the world came together in Paris to agree on an unprecedented global framework for tackling global warming.
COP21 sent an unambiguous signal to the private sector that we can and must be part of the solution, and the momentum has only accelerated since negotiators from around the world huddled in the halls of Le Bourget last December. The business community has also recognized that climate change may not just be the greatest challenge of the 21st century, but it is likely one of our greatest opportunities. That is because being part of the climate solution is not just good for the globe, it’s good for our business.
At Bank of America, we have played an active role in supporting the environment since the early 2000’s, and see an enormous opportunity to finance the transition to a low-carbon economy. That is why last year we increased our environmental business initiative from $50 billion to $125 billion and to date have directed more than $53 billion to low-carbon and other sustainable businesses and projects. It is also why we created the Catalytic Finance Initiative (CFI), which expanded this year to now include nine partners including ourselves that have pledged $8 billion in total commitments toward high impact, but hard to finance, clean energy and sustainable projects. The CFI’s goal is to reach $10 billion by 2022 and we are well on our way.
We recognize every company has its own role to play as they identify and act upon ways to make their own businesses more sustainable. That is why at Bank of America, we have been so excited to play our role in the rapid expansion of the green bond market.
Green bonds attract investors to and raise capital for projects with environmental benefits such as incorporating renewable energy into a company’s energy portfolio or making buildings more energy efficient through upgrades and retrofits. With the expectations set by COP21 for private sector action on climate change, green bonds are an important tool for raising capital. And if recent events are any indication, green bonds are already playing a pivotal role in helping businesses embrace sustainability.
According to the Climate Bond Initiative (CBI), green bonds have grown from a $3 billion in issuances in 2012 to over $41 billion in issuances last year. Bank of America Merrill Lynch is playing an integral part in the development of this market, underwriting green bonds for the likes of Apple, Starbucks, Southern Power, the European Investment Bank, TfL and Iberdrola. As more companies look to invest in environmental sustainability, CBI expects 2016 to be another record setting year for the market, likely exceeding $50 billion in issuance.
Early on, we saw an enormous opportunity to increase capital flowing to climate mitigation while creating a business opportunity for the bank. In 2013, when green bonds were first gaining attention, Bank of America Merrill Lynch, along with Citigroup, co-authored a white paper on the framework for green bonds. In 2014, this white paper formed the basis for the Green Bond Principles. The principles set guidelines for green bond issuers with regard to transparency, demonstrating environmental benefits in using and managing proceeds, project evaluation and selection, and reporting. To demonstrate its potential, Bank of America issued the first ever corporate green bond in 2013 for $500 million and followed up with a second green bond in 2015 for $600 million. In addition, Bank of America Merrill Lynch was the No. 1 underwriter for green bonds in 2014, 2015 and year-to-date 2016 according to Bloomberg New Energy Finance. We were honored to be recognized recently at the Climate Bonds Initiative’s Inaugural Green Bond Awards for our First Commercial Bank Green Bond and also by Environmental Finance for being the Biggest Underwriter of Green Bonds in 2015.
This year we are hard at work addressing climate change and actively supporting the transition to a low-carbon economy through our business, operations and employee initiatives. We understand the transition to a low-carbon economy is a tremendous business opportunity for the private sector and companies can play a direct and meaningful role in addressing climate change while fundamentally strengthening our businesses. Green bonds are one part of the solution and the growth of that market clearly shows businesses and investors alike recognize they have a critical role to play in enabling a more sustainable future. As more companies strive to do their parts to protect the environment while growing business value, they are beginning to understand that when it comes to raising capital, it’s good to go green.
You can read more about Bank of America’s work on green bonds in the company’s recently released ESG Report.
As Global Environmental Executive for Bank of America, Liftman is responsible for the company’s environmental sustainability strategy. She oversees the company’s aggressive operational goals, our environmental business initiative, and our policy positions and philanthropic investments. Liftman also gets the chance to meet new people every day while collaborating with all parts of the bank, from the investment banking group to teams at local banking centers, to identify innovative opportunities and implement changes that that will help us achieve our goals. What’s exciting about pursuing revenue-producing opportunities is that they’re good for the environment and good for the business, so they’re win-win. For example, we’ve got a thriving renewable energy practice, a growing public finance business, and a wealth management business increasingly focused on providing more values-based investment opportunities for clients.