FinancialAdaptation.org

 

 

 

U.S. Capital Markets Can Embrace a "Green" European Model

 

Sea level rise will be expensive. Very costly. That’s why all different forms of financing adaptation projects is crucial.

 

We can look at existing capital funding tools and modify them to the task of addressing the multiple challenges posed by intruding bodies of water.

 

Bonds are like loans; they allow issuers of bonds to raise money over long periods of time. As securities, bonds create extended-term creditors. Already, among the voluminous types of bonds, exist "Climate Bonds."

 

Such debt instruments are issued by governments, or even corporations. Traditionally, this form of capital finance has been divided between these sectors: Transport, Agriculture and Forestry, Energy, Climate Finance, Waste and Pollution Control and finally Buildings and Industry.

 

According to the Climate Bonds Initiative, a European group focused on climate bonds, in 2012, "Bonds that finance a water supply resilient to the impact of a changing climate remain elusive to our screening of the bond market." The same report stated that in the United Kingdom, "we were unable to identify with sufficient confidence any bonds linked to climate compatible water infrastructure or conservation solutions." (For more information, seewww.climatebonds.net).

 

Therein lies the opportunity in North America.

 

What I propose is another dimension of climate bonds....let’s call them "Sea Level Bonds." They would only be invested in the fight against rising seas and have specific adaptation goals and standards.

 

In most other respects, such SLR bonds would look like regular bonds. As the Economist noted in a 2011 article on green bonds in October, 2011, there would be no risk to the investors in the projects where the bond money is used and no extra costs would be involved.

 

What’s the advantage? Sea level rise bonds could be utilized to extend the useful life of local economies by strengthening public infrastructure to keep area viable, longer.

 

Here’s another plus: If governments are smart, creative and attractive tax incentives could make such a small segment of the bond market very attractive to investors.

 

Certainly there are many other types of bonds which pay for public infrastructure. But "green" sea level rise bonds, with specific criteria, may help create high quality standards for projects financed with this mechanism.

 

Large investors need to appreciate the great opportunities in some areas of the nation for SLR bonds. Using wise tax policies to stimulate such bonds can create hundreds of thousands of jobs as river banks and harbors are secured, agricultural acreage is raised and other engineering solutions are brought to the forefront in the battle against the insistent seas.

 

These forms of investment grade finance can play key roles in allowing local communities in dealing with some, and especially early, effects of swelling oceans. Such bond financed programs can also include constructing new storm sewer systems, securing public buildings to prevent toxins from entering the ocean when waters permanently submerge properties, raising roads and improving and protecting public transportation in SLR vulnerable areas.

 

Supporters of climate bonds maintain such tools spur significant investment. If they are correct, sea level rise bonds can create stunning economic activity across the globe. Such projects are exactly what responsible sea level rise adaptation requires.

 

If we focus on the sea level rise component of our changing planet, jobs can be created and communities strengthened...through bonds focused on rising waters.

 

The Economist opined in June, 2012, "As the climate warms, climate bonds may become quite hot."

 

My thought: As the tides threaten Main Street, SLR bonds will be quite resilient.

 

Posted 5.14.14