Green Bonds, Blockchain and Fintech: Proof of Impact

Advisor

Semester

Spring 2021

Issuers in the US municipal bond market have a significant opportunity to capitalize on investors increasingly looking for opportunities to direct capital towards investments that deliver a positive environmental and social impact - broadly defined as ESG investments. The client, Barclays Public Finance division, has posited the theory that institutional capital will flow more freely to the municipal bond market with an increase in transparency on how bond proceeds are being used, particularly with regard to their environmental and social impact. Currently investors have limited oversight over how municipal bond proceeds are deployed which prevents investors from conducting ESG analytics on bonds, thereby reducing the number of potential investors in the municipal bond market.

Columbia SIPA’s Capstone team was engaged by Barclays to investigate technological solutions to increase the transparency of the municipal issuers use of proceeds. By identifying a technological solution that helps issuers to measure and report to investors on material ESG issues, the team has sought to answer whether ESG transparency can create value and a virtuous cycle in the municipal bond market. The Capstone team explored questions revolving around whether an increase in transparency could reduce the risk profile of the security and increase the attractiveness of the security from the investors’ perspective and whether this creates benefits for the issuers by providing them with a cheaper cost of capital and more capital flows into the municipal bond market. The team provided a specific set of recommendations and technological solutions, outlining a roadmap for issuers and investors to holistically improve market outcomes in the municipal bond market.