One year on from BAML's $500m green bondExclusive

Channels: Debt, Green Bonds

Companies: Bank of America Merrill Lynch

People: Suzanne Buchta

Bank of America Merrill Lynch's (BAML) $500 million issue in November 2013 made it, arguably, the first issuer of a corporate use of proceeds green bond.

Suzanne Buchta wants other corporate issuers to come to the marketIt is also one of the few commercial banks operating in the green bond space to have issued its own paper, even though there are believed to be more than 50 banks operating as underwriters.

The proceeds of the bond were allocated by June, Suzanne Buchta, BAML's managing director of debt capital markets who oversees green bonds in the Americas, told Environmental Finance.

A range of energy efficiency and renewables projects, from street lighting upgrades to solar panel installations, were funded by the bond (see box below for more information).

Buchta said the issue – which had been under discussion internally since 2011 and was part of a broader $50 billion environmental commitment to help address climate change, reduce demands on natural resources and advance lower-carbon economic solutions – had been "a very positive experience" for BAML.

She added that it was important that the bond had verified its use of proceeds and measured the impact of the use of proceeds.

At the end of 2013, PwC signed an 'attestation' of proceeds document to verify how the proceeds had been allocated at that time. It is due to sign off on the remainder of the bond at the end of 2014.

The impact of the bond was measured with the help of EY (formerly Ernst & Young), allowing BAML to publish metrics such as the amount of carbon emissions or water use avoided.

"EY had been working closely with our environmental group to put together a process for how to measure the impacts as part of the broader $50 billion capital commitment," explained Buchta. "So, it wasn't that much additional work. It was really just putting the allocations on the website and running the metrics."

Los Angeles to be lit by LEDs - BAML bond funds $40 million streetlights retrofit (see box)

She added that a white paper describing a methodology for impact reporting will be made available to other potential green bond issuers on request.

Although Buchta feels it is important that BAML set an example by reporting the use of proceeds, she also thinks a balance needs to be struck between the demands placed on issuers to demonstrate that bonds are green.

"We have been asking investors to be realistic in terms of the various additional requirements they require of green bonds (relative to regular bonds), without a willingness to give up yield," she said.

"We want other corporate issuers to come to the market," she said. "Setting the bar too high in terms of what kind of reporting is demanded can choke a market off before it has the chance to get going."

But she added that regular reporting of how proceeds are allocated should be "doable".

Buchta was unable to comment on whether BAML was planning on issuing another green bond.

Few commercial or financial institution group (FIG) banks so far have followed BAML down the road of issuing green bonds.

"Some potential FIG green bond issuers say it's because they don't have the assets on their books, but I find that hard to believe," she said. "You have to be committed to the space to drive the process." EF

City of Los Angeles Streetlights Project

$40 million financing for the City of Los Angeles, California to finance the largest LED streetlight retrofit project in the world.
  • Water use avoided (thousands of liters): 1,407,000
  • Non-hazardous waste avoided (metric tons): 700
  • MWh reduced from efficiency projects: 71,000


Antioch Unified School District

$30 million Qualified Zone Academy Bonds (QZABs) with the Antioch Unified School District in California for solar and energy efficiency equipment.
  • Global Warming metric tons CO2e avoided: 7,700
  • Water Use avoided (thousands of liters): 206,000
  • Non-hazardous waste avoided (metric tons): 103
  • MWh reduced from efficiency projects: 1,700
  • MWh produced from renewable project: 8,700


City of Oakland Streetlights Project

$16 million structured financing for City Of Oakland, California to finance the conversion of of 30,000 high pressure sodium (HPS) cobra head streetlights to Light-Emitting-Diode (LED) streetlights.
  • Energy cost savings: $1,472,000
  • Global Warming metric tons CO2e avoided: 11,048
  • Water Use avoided (thousands of liters): 1,119,975
  • Non-hazardous waste avoided (metric tons): 147
  • MWh reduced from efficiency project: 14,869

Silicon Ranch, Simon Solar

$88.8 million True Lease financing of a 30MW utility scale solar farm for Silicon Ranch Corporation
  • Global warming metric tons CO2e avoided: 46,000
  • Water use avoided (thousands of liters): 1,228,000
  • Non-hazardous waste avoided (metric tons): 600


Atlantic Power, Canadian Hills

$42 million structured transaction with Canadian Hills Wind, a wind power equity partnership investment developed, constructed, operated and managed by Atlantic Power.
  • Global Warming metric tons CO2e avoided: 75,000
  • Water Use avoided (thousands of liters): 7,600,000
  • Non-hazardous waste avoided (metric tons): 1,000


NextEra, Pioneer Plains

$170 million tax equity investment in a wind power partnership with NextEra Energy Resources.
  • Global Warming metric tons CO2e avoided: 157,000
  • Water Use avoided (thousands of liters): 4,209,000
  • Non-hazardous waste avoided (metric tons): 2,000


NextEra, Steele Flats

$86.8 million tax equity investment in a wind power partnership with NextEra Energy Resources
  • Global Warming metric tons CO2e avoided: 114,000
  • Water Use avoided (thousands of liters): 3,050,000
  • Non-hazardous waste avoided (metric tons): 1,500


Invenergy, Prairie Breeze

$58 million tax equity investment in a wind power partnership with Invenergy
  • Global Warming metric tons CO2e avoided: 141,000
  • Water Use avoided (thousands of liters): 3,786,000
  • Non-hazardous waste avoided (metric tons): 1,900