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The labeled green bond market was $9.5 billion in 2012. Today, it has grown to $452.9 billion—a 4,700% increase.

During the early days of the Trump Administration, I wrote that while there was a clear shift in domestic energy priorities, other factors would continue to drive the clean energy revolution. These include investor demand, favorable economics and bipartisan support of renewable energy.

State and local governments, international agencies and private corporations are driving momentum toward a low-carbon economy with capital raised in the fixed income market. This funding mechanism is referred to as “green bonds.” Green bonds provide investment opportunities that offer the potential to achieve a “double bottom line” of competitive financial returns, along with direct and measurable environmental benefits.

There are two types of green bonds:
1. Labeled - Issues that meet specific industry conventions and/or receive third-party certifications
2. Unlabeled - Proceeds used to climate-aligned projects and initiates but are issued without formation certifications 

Exponential growth and diversification

The green bond market has grown rapidly since its first issuance in 2007. The market remained concentrated by issuer type and use of proceeds in the early years, but issuance and diversification has since grown exponentially. The labeled green bond market alone has grown to $452.9 billion and has rapidly diversified. Meanwhile, the unlabeled green bond universe is estimated at roughly three times the size of the labeled market. This expansive universe, combined with our pioneering work with issuers, underwriters and industry groups, affords us a unique opportunity to align our investors’ bond holdings with their principles. 

As the third largest investor in labeled green bonds globally—and largest in U.S. dollar denominated issues1—we expect to see an expansion of investment opportunities that meets our financial and environmental objectives of competitive total returns, outperformance potential, and demonstrable climate-aligned outcomes.
 
Nuveen knows fixed income

One of the key differentiators of our active responsible investing fixed income approach is our proprietary impact framework. The framework ensures that we invest in securities that have demonstrable positive impact while always focusing on value metrics—both relative and absolute. We have been able to take advantage of our reputation as a market leader and innovator to invest in new and unique securities.

Issuer: South Davis County, Utah Sewer District

Alignment with UN SDGs:
 

Nuveen knows fixed income

Use of proceeds:
Energy from waste
Key goals:
Electricity generation expected to power 25,526 homes; displace CO2 equivalents equal to taking ~36,000 cars off the road

Issuer: International Finance Corporation (IFC)

Alignment with UN SDGs:
 

Nuveen knows fixed income

Use of proceeds:
Reduced deforestation in East Kenya
Key goals:
Protect 200,000 hectares (nearly 500,000 acres) of forest; offset 1.4M tons of CO2 emissions annually

1 Bloomberg as of 7 Jun 2018.

Risks and other important considerations
Investing involves risk, principal loss is possible.
An investment which includes only holdings deemed consistent with applicable Environmental Social Governance (ESG) guidelines may result in available investments that are more limited than other investments that do not apply such guidelines. ESG criteria risk is the risk that because the criteria excludes securities of certain issuers for nonfinancial reasons, an investment may forgo some market opportunities available to investments that don’t use these criteria.
The investment advisory services, strategies and expertise of TIAA Investments, a division of Nuveen, are provided by Teachers Advisors, LLC, and TIAA-CREF Investment Management, LLC.