Green Bonds, a Fast-Growing Money Game with the Clout to Develop Clean Energy, Await an Umpire

The portion of the business world devoted to renewable energy resembles the telecom industry in the 1980s, said Reed Hundt, now the CEO of the Coalition for Green Capital, a nonprofit working to drive renewable investment by creating so-called green banks.

"I think that we're in the really early days," he said during a panel talk on green bonds, adding that a "total, radical, disrupting overhaul" of the energy sector must be accomplished with a massive lending market and robust debt securitization.

The search for the right metric

Hannon Armstrong, a real estate investment trust, or REIT -- a specialty finance firm that invests in real estate through properties or mortgages and works like a mutual fund -- is a part of that market.

In December 2013, Hannon Armstrong issued a green bond for $100 million.  Roughly $39 billion in green bonds were issued last year, up from slightly more than $10 billion in 2013. And there were outstanding bonds worth $53.2 billion at the end of 2014.  Within that pool, the Hannon bond seems distinct.

"[It is] the first bond and, we think, the only green bond to have a carbon metric on it," said Jeff Eckel, Hannon Armstrong's CEO.
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"The assets underlying" this bond, Eckel said in a statement when it was issued, "are estimated to reduce annual greenhouse gas emissions by 0.61 metric tons per $1,000 bond."

The market for these environmental fixed-income instruments has boomed since their advent in 2008, but investors see varying shades of green.

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