How to Issue a Green Muni Bond

How to Issue a Green Muni Bond: The Green Muni Bond Playbook

Green bonds are essentially identical to the normal bonds that municipalities issue, except that:

• The bonds are labeled as “green” by their issuer,
• Proceeds are earmarked for green investments, and
• The issuer tracks and reports on the use of proceeds to ensure green compliance

Green bonds may be general obligation bonds, meaning they are backed by the issuer’s entire balance sheet and therefore have the same credit profile as other non-green bonds from that issuer. Alternatively, green bonds may be revenue bonds backed by specific revenue streams (e.g. water or sewer fees or tax revenues) rather than the issuer’s full balance sheet, or project bonds, which are backed by the financial performance of specific green projects. Revenue bonds, like general obligation bonds, allow investors to invest in green projects at the same credit risk as non-green bonds with the same format; project bonds allow investors to gain exposure to green project risk and returns.