Morgan Stanley issues inaugural green bond

The $500m bond, which will mature in December 2018, offers bondholders a 2.2% annual interest rate.

Morgan Stanley has issued its first $500 million green bond to fund renewable energy and energy efficiency projects, the US investment bank announced this week in a statement. 

While wind and solar energy projects are eligible to receive funding, equipment, systems, products or services that can help reduce energy consumption are also eligible.

“However, these investments exclude projects to retrofit or otherwise upgrade power plants that primarily use fossil fuels in order to improve their efficiency or reduce their environmental emissions,” according to the issue's prospectus.

Projects that have already been selected to receive funding include Route 66 Wind, a 150-megawatt (MW) wind power project developed by First Wind, now part of SunEdison; Stephens Ranch II, a 165MW wind project, developed by Starwood Energy; the 207MW Rattlesnake Wind Energy Center, being developed by Invenergy; and Briscoe Wind Farm, a 150MW project being developed by Capital Dynamics.

The process for selecting projects is highly transparent, Morgan Stanley said, since before issuing the bond, the bank had established a “green bond framework.” That framework is aligned with the Green Bond Principles, a set of voluntary guidelines for the development and issuance of green bonds that encourage transparency, disclosure and integrity in the development of the green bond market, of which Morgan Stanley is a founding signatory.

Proceeds from the sale of the notes will be deposited in a separate Morgan Stanley account for tracking disbursements, while an independent accountant will report with respect to stated disbursements, according to the statement.

“Morgan Stanley’s green bond is part of the firm’s broader commitment to sustainable finance,” the bank said, noting that since 2013 Morgan Stanley has led 27 green bond transactions representing over $15 billion in aggregate principal amount.

The green bond market has enjoyed dramatic growth, ratings agency Standard & Poor’s (S&P) said in a recent report, adding that it expected this trend to continue.

“Based on current trends, we estimate that issuance of corporate green bonds could reach $30 billion this year, exceeding by nearly half the $19.1 billion companies raised since the market emerged at the beginning of last year,” S&P said in April.

According to the agency, the biggest advocates of green bonds are corporate borrowers looking to protect themselves from natural catastrophes by funding projects that combat climate change.