California Green Bonds Take Flight

By: State Treasurer John Chiang

The Golden Gate Bridge is not only one of the most iconic bridges in the world, but it is also one of the planet’s greatest engineering marvels. It was financed by $35 million in bonds, in 1930’s dollars.

Due to the Great Depression, these bonds initially sat unpurchased, but, in 1932, an institutional investor stepped forward and bought all the bonds. Every one of them!

Many thought it was impossible to connect the San Francisco Bay, yet, this one investor had a vision that would put men to work and bridge the two sides of the bay. But the bridge heralded more than just the connection of two land masses. This was a bridge to a changing world. A bridge that has benefitted generations of Californians.

I saw that same bold vision being embraced at multiple events during Governor Brown’s Global Climate Action Summit in San Francisco just a few weeks ago.

At an event sponsored by the Norwegian Consulate in San Francisco, I spoke to a group about green bonds, and how this type of green financing is helping pay for our infrastructure projects in an environmentally friendly way. Green bonds can be public, private, or multilateral institution debt issued to finance climate-friendly projects, like clean energy, green transportation, or energy efficient buildings, and can even be used for projects like water management, pollution control, or toxic waste cleanup.

For a country roughly the physical size of California, Norway ranks high on the global green bond scale. This year alone, Norway has rang up more than $3 billion U.S. dollars in green bond issuances for low-carbon footprint residential buildings. In fact, the entire Nordic region is rife with enviable green bond statistics: Sweden ranks 6th, Norway 16th, Denmark 17th, and Finland 20th by cumulative issuance of green bonds.

While Norway has shown its commitment to green bonds, California is not without its own commitment to green financing. From 2009 to date, the California State Treasurer’s Office has invested $1.5 billion in green bonds. And, to help us build the new infrastructure we need as we transition from a fossil fuel economy to one that is based on clean energy, my office just announced the purchase of an additional $200 million in green bonds issued by the World Bank. These bonds will help us finance projects that meet specific criteria for low-carbon and climate-resilient growth, and will mitigate the damaging effects of climate change resulting from our dependence on fossil fuels.

In addition, in August, I signed the Green Bond Pledge, and made California the first state in the nation to pledge to use green financing to combat climate change. My signature on that document concluded a two-year process that began with a five-city, national listening tour, where we met with market experts and investors to identify barriers and challenges to growing the green finance market.

As I conducted that listening tour, there was a question I heard over and over again: “Why does America lag so far behind in the issuance of green bonds?”

Here in the U.S., the president and Congress won’t act. In fact, our national government wants to ignore what 98 percent of scientists already agree on.

So it’s on California, and like-minded cities and states, to work directly with thought leaders, and help lead the way for the United States. Because if Washington, DC doesn’t want to partner with countries like Norway, California will. As the fifth largest economy in the world, California will lead the way and help finance as much new clean infrastructure as we possibly can.

And we are seeing other leaders from across the country step up as well. Asheville, North Carolina just signed the Green Bond Pledge. The Republican mayor of Miami, Florida has said he believes in climate change and is taking action. The City of Georgetown, Texas has announced they’re going 100 percent renewable.

Which takes me back to what California is doing. Governor Brown recently signed legislation to phase out all electricity produced by fossil fuels by 2045. For such an ambitious initiative, many will wonder, how will we get there?

When I signed the Green Bond Pledge, I also released a report titled Growing the U.S. Green Bond Market, Volume 2, which chronicles strategies and solutions to animate this market.

One of the first steps is for Governor Brown and I to establish a working group that will redeem California’s Green Bond Pledge and fulfill the vision of the legislation he signed.

It’s time for our infrastructure projects to align with climate realities, and time for us to think expansively once again; like we did 80 years ago, at the time we built the Golden Gate Bridge.

Only, instead of building a golden bridge from one land mass to another, let’s build a bridge to a future that will benefit all Californians, as much as the Golden Gate has this generation.

To learn more about growing the U.S. green bond market click here.

The preceding article is based on remarks delivered by California State Treasurer John Chiang at the Global Climate Action Summit in San Francisco, CA on September 14, 2018. To learn more about growing the U.S. green bond market click here.