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From Stanford to Oberlin, Schools Rush to Tap the ESG Bond Market

By District Energy posted 01-31-2022 12:46




Eager to show their commitment to mitigate climate change, U.S. colleges are touting their efforts in the bond market with a trendy financing tool.

Schools last year floated almost four times as much debt branded with green, sustainability or social labels as the year before, taking advantage of the hunger from investors who want securities that signal their own interest in the environment.

Perennial builders and repairers of their mini cities, colleges are funding projects that will reduce their carbon footprint. Oberlin College essentially conducted its own price experiment in July when it sold debt with a climate-bond certification to convert its energy system to geothermal. Stanford University sold $300 million of climate and sustainability bonds for projects that support the school’s emission-reduction goals. Common projects on many campuses are new buildings that adhere to greener standards than older facilities. Ohio State University became an early entrant to the green-bond market when it borrowed $600 million in September for a new inpatient hospital in Columbus that promotes energy efficiency and conserves water.

Sales of so-called ESG bonds -- for environmental, social and governance -- are an emerging trend in the municipal market, where states, cities and public entities like colleges and hospitals raise money to finance capital projects. In 2021, municipal borrowers sold more than $50 billion of green-, social- or sustainability-labeled debt, far and away a record, according to data compiled by Bloomberg. And while colleges and universities accounted for a $1.7 billion sliver, the sharp upward trajectory mirrors the broader market.

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