Based on our work to develop this fund, I think advisors need to be more proactive about using social and impact investing, not just waiting for their clients mention it. They should take the time and make the effort to know about it and have some good ideas for how to direct their clients’ assets in this area.
Ellis: Tell our readers about muni bond funding for municipal infrastructure buildout and renewal projects.
Farrington: From a public infrastructure standpoint one of the main areas of focus will be the delivery of clean water and wastewater treatment. The California drought issues are an example.
Dearborn: Aging inner-city school infrastructure K-12 is also an area of capital investment for the fund. Rebuilding public and charter schools is part of our mandate.
Farrington: We’ve identified areas of focus like energy efficiency improvements for hospitals. Retrofits for greater efficiency, water reuse and waste recovery system projects are currently in the fund as well, and we expect to find more. Using a formula developed with Sustainalytics, we grade projects from high to low impact, and expect to eventually be fairly evenly distributed across the varying levels of impact.
Dearborn: In addition, state and local governments will participate in the process for meeting the Paris COP21 carbon footprint reduction agreement guidelines. Their funding needs will play right into this fund’s wheelhouse. So it’s not just social bonds in health care, housing and education. We are including environmentally focused projects as well.
Ellis: Are you participating in the dialogue around defining the metrics for green bonds?
Dearborn: Our partner Sustainalytics is well established as a third party verifier for green bond certification. We’re happy to be part of that process and try to use a common set of standards, but are not involved in any public dialogue about what is and is not a green bond.
Farrington: Municipal bonds have typically been more difficult from a disclosure standpoint in terms of getting information. But we’re finding more issuers are getting interested in this area. The New York City Housing Development Corporation, for example, relabeled their entire program Sustainable Neighborhood Bonds to highlight areas they have always focused on but not reported on.
We can work at the grass roots level to raise the profile of these issues. I think we’re going to see these metrics become more available as the issuers recognize their importance.