New York's Metropolitan Transportation Authority (MTA) issued two green bonds in 2016, raising a total of $1.37 billion.
MTA is the largest provider of public transport services in the US, moving more than 8 million people a day, predominately on subways and commuter trains. A regular issuer of muni bonds, it issued its first bond with a green label in February 2016, and upsized the issue from $500 million to $782 million on the back of strong investor demand.
Like most US muni bonds, it had a range of tenors and coupons. The issue, the proceeds of which were to finance various infrastructure upgrade projects, was also the first time a bond in the US had been certified against the Climate Bonds Initiative's (CBI) Low-Carbon Transport criteria. Sustainalytics was the verifier.
Most green bonds in the US muni market have no external assessment of their green credentials, making this deal unusual, points out Thomas Mead, managing director at Drexel Hamilton, an underwriter on both deals.
The bank adds that numerous insurance companies were among the buyers, as well as the retail investor base that typically buys US muni bonds.
It returned to the market in May, raising a further $588 million. In February and March 2017, it tapped the market again, raising $312.8 million and $325.6 million, respectively, and MTA is set to be an even bigger issuer in coming years.
"The MTA anticipates the bulk of its new money issuance, averaging $2.4 billion annually for the coming years, to be issued as CBI-certified green bonds," says MTA spokesman Aaron Donovan. "MTA estimates that its services result in the avoidance of 17 million metric tonnes of carbon dioxide being released into the atmosphere each year, while only generating 2 million metric tonnes of carbon. This carbon reducing profile makes MTA a natural investment choice for investors who want to invest in green bonds."