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Energizing the Green Bond Market

Growth of green bonds market underscores rising demand among investors for profitable financial products that create positive environmental and social impact.

Over the past few years, green bonds have raised billions of dollars to help fund environmental and other sustainable development projects: rapidly growing from $1 billion issued in 2012 to more than $30 billion in 2014 globally.1

On June 8, Morgan Stanley issued its inaugural green bond to help facilitate $500 million in funding for existing and future renewable energy and energy efficiency projects. Examples include Route 66 Wind, a 150 MW wind farm under construction in Texas, and Rattlesnake Wind Energy Center, a 207 MW wind power project also under construction in Texas.

Ahead of this offering, Morgan Stanley created a green bond framework that describes the process through which projects are selected to receive funding, with the aim of ensuring that the Morgan Stanley green bond operates at high levels of transparency, disclosure and verification. Morgan Stanley’s green bond has received a comprehensive review from an independent certification expert in renewables and energy efficiency. In addition, an independent accountant will report with respect to stated disbursements. Get project updates and impact-focused reporting for this issuance.

Morgan Stanley’s first-ever green bond issuance and the broader growth across the market reflect what has become fertile ground for green bonds, which are similar to other fixed income instruments except that the proceeds are directed toward specific projects that address environmental issues. There is healthy demand from investors, which in turn has fed the confidence of institutions seeking to achieve their sustainability goals through capital markets solutions, a virtuous cycle with plenty of room to grow.

“Morgan Stanley is committed to helping our clients develop and pursue sustainable investing solutions that can address social, economic and environmental challenges at scale,” says Tom Nides, Vice Chairman at Morgan Stanley. "In the green bonds market, our firm is activating a wide range of capital markets expertise and capabilities to break new ground and mobilize capital towards realizing significant environmental impact."

Growing Market

Before issuing its own green bond, Morgan Stanley has been a pioneer in the growth of the market, underwriting green bonds globally for multilateral development banks, corporates, agencies and municipalities. Several of these transactions have included notable industry landmarks, including the first-ever corporate green bond, the first-ever automobile asset-backed securities green bond and the first-ever U.S. university green bond. Since 2013, Morgan Stanley has led 27 green bond transactions representing over $15 billion in aggregate principal amount. Morgan Stanley is also a founding signatory of the Green Bond Principles, which are voluntary guidelines for the development and issuance of green bonds, encouraging transparency, disclosure and integrity in the development of the green bond market.

“Our work at the outset was primarily with multilateral development banks, and we’re increasingly seeing more activity through European corporate issuance and American municipalities,” says Navindu Katugampola, Executive Director in the Sovereign, Supranational & Agency Group. “This is an exciting opportunity for us at Morgan Stanley. As a leader in the capital markets, we are working within the green bonds market to direct large amounts of capital towards addressing global challenges.”

Collaborative Effort to Serve Clients

Morgan Stanley brings its expertise to green bonds from across the firm. In September 2014, Morgan Stanley underwrote a $350 million green bond for the Commonwealth of Massachusetts, which sought to expand its investor base to include more individual investors. Morgan Stanley Public Finance, the firm’s municipal banking team, coordinated a comprehensive pre-pricing marketing effort that leveraged the Morgan Stanley Institute for Sustainable Investing, Wealth Management Financial Advisors, as well as Institutional sales teams and syndicate desks in New York and London.

"We couldn’t be more proud to have worked with the Commonwealth, marketing their green bonds to our Financial Advisors and high-net-worth clients, particularly in our Massachusetts branches," says Paul Servidio, Executive Director, Wealth Management Capital Markets. "The success and buzz surrounding this deal demonstrates our clients are passionate about funding environmentally beneficial capital projects.”

The transaction also bodes well for municipalities across the country. “Market participants will look back on this municipal green bond issuance for Massachusetts, and see it as the gateway to further green bond issuances across the many states and many cities that are hoping to access less expensive funding to improve infrastructure, protect natural resources and offer renewable energy,” says Bill Daley, Managing Director in Public Finance.

The Institute for Sustainable Investing, created in 2013 and dedicated to developing innovative, scalable sustainable finance solutions, has been instrumental in supporting the firm’s leadership on green bond issuances. The Institute seeks to provide opportunities for all of Morgan Stanley’s clients to access the growing market for sustainable investment.

“Demand continues to rise among individual investors for investment opportunities that can create positive environmental and social impact,” says Audrey Choi, CEO of the Institute for Sustainable Investing. “Through the Institute for Sustainable Investing and our Investing with Impact Platform, Morgan Stanley is well-positioned to meet the growing demand for quality sustainable investing products.”

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