106 / Rotman Management Spring 20 19
The answer may be in the burgeoning market for sus-
tainable and responsible investments (SRI). Worldwide,
more and more investments have been made with regard
for sustainability. In 2015, the market for all types of SRI of-
ferings reached US$ 22.90 trillion (26.3 per cent of all global
capital markets) according to the Global Sustainable In-
vestment Alliance (GSIA). Specifically, two approaches
may be the most relevant to sustainability practitioners
within companies: green bonds and impact investments.- GREEN BONDS
Green bonds (publicly or privately issued) raise and deploy
funds for environment-beneficial projects (retrofits, clean
energy, pollution mitigation, etc.), offering a safe and pre-
dictable rate of return for investors often at a rate slightly
lower than more traditional bonds. Remarkably, green bond
issuance grew more than 100 times between 2012 and 2017,
from US$3 billion to US$389 billion (according to the Cli-
mate Bond Initiative).
For sustainability professionals and their companies,
there is a clear opportunity here to get past the capital road-
block. The cost of capital of green bonds can sometimes be
lower than that from other sources, even internal sources.
In this case, external capital could be more attractive than
internal capital. Companies that access funds through green
bonds could potentially be able to allocate funds to their
highest-potential capital projects and — at the same time —
fund more activities with environmental benefits.
There are two principal ways for practitioners to use
green bonds: raising your own funds by issuing a corpo-
rate green bond; or accessing green bonds raised by oth-
ers. More and more companies are issuing their own green
bonds. There are plenty of examples: Unilever, Apple and
Toyota Finance have issued bonds worth billions for their
own green projects. Best of all, companies issuing green
bonds appear to be paying both environmental and finan-
cial dividends. Boston University Professor of Strategy
Caroline Flammer recently noted that corporate green
bonds “yield a positive stock market reaction, improve-
ments in financial and environmental performance, an in-
crease in green innovations, and an increase in stock own-
ership by long-term and green investors.”
Companies can also access funds raised by govern-
ments, municipalities and a range of private players through
green bonds. Examples include green bonds worth more
than US$4.35 billion by Bank of America, and in Canada,
the Canadian Pension Plan Investment Board (CPPIB)
raised over $3 billion for investments.
However, there remains a risk that such funds are not
consistently ‘green’. To overcome this, financiers appear to
be increasingly making use of the ‘Green Bond Principles’
(GBPs) or the Climate Bond Certification (CBCs), as well as
third party verification.- IMPACT INVESTMENTS
Impact investing is another type of SRI investing that seeks
both measurable social and environmental impact along-
side financial returns. Between 2013 and 2017, the global
impact investing market grew almost tenfold from US$ 25.4
to US$ 228 billion. As the market continues to grow, more
and more major financial institutions like BlackRock and
UBS are joining pioneers like Bridges and Calvert.
With all of these funds seeking investments, sustain-
ability professionals may be able to access external funds
that align with their environmental and social benefit initia-
tives. This may be most compelling for companies that have
a tangible environmental or social purpose — for example,
renewable energy or education. However, even more tra-
ditional companies could potentially seek investments for
specific projects.
Clearly, the type and the stage of an organization plays
a role in determining how to access these markets. For start-
ups or social enterprises (businesses with a specific social or
environmental purpose), there are a range of fast-growing
Unilever, Apple and Toyota Finance have issued r
bonds worth billions for their own green projects.