Sustainable Fixed Income Investments Driving the Climate Transition

November 2023 | Sustainable Fixed Income

Over the last couple of years, opportunities for sustainable fixed income investments have increased substantially. Investors are conscientiously looking at their investment portfolios to find bonds financing positive sustainable impact outcomes that can help accelerate the transition to a green economy. A big reason for the growing investor interest in sustainable fixed income is the ability to finance projects with the use of proceeds that are directly connected with sustainability and social impact.

A Goldman Sachs report from earlier this year mentions how the global bond market will be an important source of investment to drive the climate transition, and green bonds finance projects with positive environmental impact. It goes on to say that the green bond market expansion reflects the commitment by bond issuers to finance the energy transition and address climate risks; investors seeking potentially attractive returns while helping advance the shift to a low-carbon economy; and policymakers encouraging green investment with incentives and setting standards for measuring impact.[1]

At Community Capital Management (CCM), we must have a high degree of confidence that the use of, or intent of, proceeds will result in positive environmental and/or societal outcomes as defined by one or more of our impact themes or that the issuing entity supports one or more of our impact themes. Examples can include bonds that have a clearly articulated and positive use of proceeds (usually found in the bond’s issuing documentation). The issuers of such bonds must also pass a separate internal review to ensure that we are lending to entities whose practices are not inconsistent with our strategy’s goals for positive environmental and/or social outcomes.

One recent investment example of a bond CCM purchased that is financing sustainable resources and the climate transition is a Texas water bond. It was recently featured as our story of impact. The taxable municipal bond was issued for the purpose of conserving and developing Texas’s water resources, more specifically, financing water and wastewater projects in economically distressed areas where the area median income is 75% or less.

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