The Seychelles Blue Bond supports economic development and the expansion of marine-protected areas in the Seychelles, the multi-island nation in the Indian Ocean off East Africa. The country is very dependent on tourism and fisheries, and one of its key challenges is implementing strategies that will boost its long-term resilience to climate change without weakening economic growth, says Liberatore. The bond’s proceeds will be used to help the country transform its fisheries into more sustainable ones and will otherwise fund expanded marine protections.
The blue bond was made available in a private placement to Nuveen, Calvert Impact Capital and Prudential. Individual investors can hold the bonds only through investment products offered by those firms. The World Bank will help the Seychelles report on the effectiveness of programs funded through the bond, which pays a 6.5% annual coupon to investors.
Other environmentally friendly projects use municipal bonds.
For instance, investors can buy muni bonds for the Honolulu Program of Waste Energy Recovery (known locally as the Covanta H-Power project). This program converts Honolulu’s municipal solid waste into steam energy. The Red Rock Biofuels LLC Clean Energy Project with the Oregon Business Development Commission, meanwhile, converts woody waste from forests and sawmills into jet fuel. That waste would have to be burned, and the jet fuel produced is 60% lower in carbon concentration than normal jet fuel, Liberatore says. Investors can buy the individual securities for these projects or get exposure through funds such as the TIAA-CREF Social Choice Bond Fund.
With solar ABS and waste-to-energy investments, investors can expect to receive returns anywhere from 2.5% to 10%. The credit quality varies from “AAA” to unrated, and the returns depend “on what part of an unrated deal an investor comes in on, rates at issuance and whether the securities are held to maturity,” Liberatore says.