Out Monday: a very interesting bond from US listed sustainable infrastructure investor, Hannon Armstrong Sustainable Infrastructure (NYSE:HASI): a $100 million asset-backed securitization of cash flows from over 100 individual wind, solar and energy efficiency installations, all with investment grade obligors. They’re calling them “Sustainable Yield Bonds”; Climate Bonds for us. Coupon is 2.79%. This first bond was privately placed – but they’re planning lots more.
Hannon Armstrong have taken the high ground on emissions and built in quantitative annual reporting of greenhouse gas emission reductions, measured in metric tons per $1,000 of par value. The assets underlying the bond are “estimated to reduce annual … emissions by 0.61 metric tons per $1,000 bond”. The company says the annual estimated 61,036 metric tons carbon savings are ”the equivalent of taking approximately 12,700 cars off the road”. Investors will get emissions reporting data project by project, although individual projects won’t be named ”for competitive reasons”.
We like the blended portfolio approach – that’s how we’re going to get to scale in the fragmented climate investments market – with emissions reduction reporting giving us comfort on the building energy efficiency portions.
Being asset-backed means it’s real, extra, money being raised against the cash flows, freeing up capital for Hannon Armstrong to move on to the next crop of projects. That’s the ideal role for bonds in the capital pipeline.
Great work from Hannon Armstrong.
Sean Kidney is Chair of the Climate Bonds Initiative, an “investor-focused” not-for-profit promoting long-term debt models to fund a rapid, global transition to a low-carbon economy.