Green bonds

Green bonds are issued by governments to generate money to support environmentally friendly business ventures. While still in their infancy in the US and Europe, they are set to grow as green investing becomes more mainstream.

Green bonds are issued by governments to generate money to support environmentally friendly business ventures. While still in their infancy in the US and Europe, they are set to grow as green investing becomes more mainstream.

Green bonds in the United States got a major boost in 2004 when they were designed to provide funding – some $2 billion worth of AAA-rated bonds issued by the United States Treasury – in efforts to reclaim contaminated industrial and commercial land (brown fields), and encourage energy conservation and the use of renewable energy sources.

In order to access the funds, building projects must cover at least 20 acres, commit to generating a portion of its own power through the use of solar panels and fuel cells, meet strict emission standards, and meet the standards set by the United States Green Building Council's Leadership in Energy and Environmental Design (LEED) certification program. The first major project financed by green bonds is a retail complex in New York called Destiny USA. The complex qualified for $1 billion in funding, of which $238 million was generated when bonds were sold to the public in February of 2007.

Other countries are also issuing green bonds. The Malaysian government approved a 15-year agricultural bond issue in 2006, worth up toUS$530 million. The bond will cover the cost replanting trees on 375,000 hectares of land. This effort will support the country's massive hardwood export business.