As pioneers in the management of impact/ESG investing and fossil fuel free bond portfolios, the team at Community Capital Management (CCM) is committed to sharing thought leadership and educational perspectives. One space we have seen a need for these perspectives is in the research of bonds labeled as “green.”
To learn about our general views on green bonds and why CCM’s investments go beyond the state and/or issuer’s “green” label, read Part I, Part II, and Part III of this blog series. This fourth and final blog focuses on one of the three main sectors of the bond market in which CCM invests.
Asset-backed securities (ABS) are financial securities backed by a loan, lease, or receivables against assets other than real estate and mortgage-backed securities.
ABS finance affordable loans, enterprise development/jobs, environmental sustainability, and more. This includes Small Business Administration (SBA) loans which can finance enterprise development for small businesses helping to create and retain jobs, provide access to capital, and assist with capital for expansion, or other business-related activities.
In the last few years, we have seen increased issuance of more innovative financing in the sustainable ABS space such as solar asset backed notes sponsored by Tesla, following its acquisition of SolarCity Corporation. While some ABS have a “green” label, many others do not even though they have a variety of environmental benefits.
The following are two examples of ABS purchased on behalf of CCM portfolios that are financing a variety of environmental and social initiatives.
SolarCity Corporation d/b/a Tesla Energy
SolarCity Corporation, d/b/a tesla Energy, was acquired by Tesla, Inc. in November 2016 to create the world’s only integrated sustainable energy company, from energy generation to storage and transportation. Tesla’s mission is to accelerate the world’s transition to sustainable energy for a better future. The Notes are collateralized by cash flows related to Tesla Energy’s interest in the Managing Members of four partnerships that own portfolios of solar energy systems and related Host Customer Leases/Power Purchase Agreements originated by Tesla Energy. The collateral pool is made up of 33,499 solar assets comprised of residential (98%) and commercial/government (2%) host customers across 19 states and 97 utility districts. The primary states include California, Maryland, Arizona, New York and Massachusetts.
Tesla Energy customers purchase electricity, solar energy systems and other energy-related products and services from Tesla Energy that typically lower their overall energy costs. Products include solar panels to produce clean energy, powerwalls to store energy and allow households to become 100% self-powered, solar roof’s and large scale solar and storage projects. The majority of Tesla Energy’s solar energy sales are in the form of long-term leases or power purchase agreements which provide households with green energy typically at a discount to utility rates.
Craters & Freighters
Craters & Freighters is a specialty freight handling company with 13 employees in Garland, Texas. The company was founded in 1990 and aids both customers and businesses in all sectors with their specialty freight handling needs, including pick-up, crating, shipping, packaging, tracking, insuring and delivering of shipments that are too heavy/oversized, or too valuable and time-sensitive.
Recognizing the opportunity for the radical improvement of environmental conservation in the packing and transportation industry, Craters & Freighters launched a sustainable initiative in June of 2015 to help reduce climate change and create environmental solutions that benefit people and communities. By partnering with Arbor Day Foundation and Trees for the Future, the company has committed to planting a tree for every crate they build. Their goal with this initiative is to give back to the communities in which they operate and do their part to help replenish national forestry and drive sustainability.
Craters & Freighters prides themselves on being deeply involved in the research and development of new and innovative eco-friendly packaging and shipping methods. Many of their locations use the latest technology in eco-friendly cushioning products including recycled cardboard materials.
The loan to Craters & Freighters was authorized under the SBA’s 7(a) program which was established to serve small business borrowers that cannot otherwise obtain private sector financing under suitable terms and conditions. The program is the SBA’s primary vehicle for providing small businesses with access to credit.
For more information about CCM’s impact investment portfolios and more case studies, please read our full report, “An Approach to Incorporating Sustainable Investing Within Your Bond Portfolio.”
Tesla Energy is the largest distributed generation solar power provider in the U.S., with over 3.1 GWs of installed capacity across over 360,000 residential and commercial customers as of June 30, 2017. https://www.tesla.com/blog/tesla-and-solarcity