The United States deteriorating infrastructure is woefully underprepared to address the challenge of adapting to climate change. The American Society of Civil Engineers estimates it will cost $2 trillion just to bring America’s infrastructure into a state of good repair, and an additional $2 trillion to meet the challenge of accelerating climate change. The cost of inaction and delayed action is likely much higher due to sea level rise, extreme weather events, and related infrastructure damage. Absent increased spending by governments at many levels, these funding needs will require new ways to attract capital for infrastructure projects.
The existing funding gap has presented an opportunity for global capital markets to create investment vehicles that provide long-term yield. One such vehicle that has arisen in the past decade is the green bond: a traditional fixed income security with an additional layer of environmental sustainability.
Expanding the scale of green bonds to dent the $2 trillion infrastructure financing gap will require a variety of policy and product innovations, from standardization and metrics to pricing and public-sector incentives. To find new ways to fund these much-needed improvements, California State Treasurer John Chiang began a project in 2016 to outline the challenges in the market and propose innovative solutions.
The process began with a series of “listening sessions” throughout the United States. The initial result of those sessions was the publication of Volume 1 of this report, which addresses the state of the U.S. green bond market. Following the release of Volume 1, the Treasurer partnered with the Milken Institute to co-convene a Financial Innovations Lab as part of a two-day Green Bond Symposium, the first event of its kind in the U.S. The Lab, held on the first day of the Symposium at the Milken Institute in Santa Monica, California on February 27, 2018, brought together government leaders, investors, issuers, underwriters, and project developers to discuss and debate potential recommendations that would help to move the market forward. This report, as a companion to Volume 1, outlines the key issues and solutions.
Lab
February 2018
Santa Monica, Calif.
