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Is It Time to Explore Green Bond Issuance?

May 2022

By: Emily Abrantes & George Huang

Defining ‘Green Bonds’

For the purposes of this article, the term ESG bonds encompasses the following types of ESG financings:

  • Green bonds: These bonds enable capital-raising and investment for new and existing environmental projects. Those that carry this designation seek to support issuers in fostering a net-zero emissions economy and protecting the environment.

  • Social bonds: Proceeds from these bonds are applied to projects that are intended to have positive social outcomes. 

  • Sustainability bonds: Proceeds from these bonds are exclusively applied to finance or refinance a combination of both green and social projects.

What Higher Education Finance Leaders Should Consider

A higher education institution’s commitment to sustainability is increasingly viewed as a natural fit for its mission. Now, as “green finance” begins to pick up pace among higher education institutions, finance leaders are proactively determining their institution’s environmental, social, and governance (“ESG”) practices, including risk management and financing opportunities. 

To be sure, we’re still in the early days of ESG-labeled municipal bonds. While colleges issued quadruple the amount of green bonds (1)—more than $1.7 billion, including via private placement—in 2021 compared with 2020, this is just a sliver of the $50 billion in municipal green bonds issued last year (2) across sectors. However, growing interest in municipal green bond issuance among higher education institutions—combined with the alignment of ESG core principles with educational values and goals, more intense focus (3) on ESG-related performance and risk, and more universities pledging to become carbon neutral (4)—make it clear that green bonds should be on finance teams’ radar. 

C-suite leaders also should understand the investment cost implications of green bonds—including costs related to resource and reporting requirements—as they consider how to incorporate ESG bonds into their capital planning process. 

The Move Toward ESG Bond Issuance in Higher Education

It’s clear that globally, ESG issuance is picking up interest, according to Refinitiv (5), an American-British provider of financial market data. Since the inception of the “sustainable debt” concept in 2007(6), cumulative global bonds issued for ESG initiatives reached $1.7 trillion in 2020, per Refinitiv data, of which green bonds account for about two-thirds. In 2021, global green bond issuance—also known as impact bonds—exceeded $1 trillion for the first time, growing 77 percent, according to ICE Data Services.

For higher education institutions, a commitment toward reorienting operations to decrease their impact on the environment, such as by reducing greenhouse gas emissions, investing in sustainable development, and incorporating environmentally friendly practices across disciplines, has long been a leadership imperative. Millennials and Generation Z, known as the “Sustainability Generation (7),” embrace ESG issues, and they have been increasingly vocal in demanding ESG accountability from the colleges and universities they attend in recent years. For higher education institutions, taking steps to address climate change is crucial as they prepare a more socially conscious generation for leadership.

What is new is the emerging emphasis on municipal ESG bond issuance among higher education institutions. In the past year alone:

  • Stanford University became the first higher education institution in U.S. history (8) to issue bonds with dual climate and sustainability designations. The $375 million issuance will be used to finance or refinance capital projects.

  • Oberlin College issued $80.6 million in Series 2021A corporate taxable certified climate bonds that will help the college achieve its goal of becoming carbon neutral by 2025. The bonds represent the second Certified Climate Bond offering among U.S. higher education institutions and the third in the world (9). The $40.4 million Series 2021B corporate taxable bonds—without a climate bond label—sold with an identical 30-year term bond structure (albeit with a significantly smaller par amount) on the same day and priced 5 bps wider at 2.924 percent versus 2.874 percent. While neither of the bonds were index eligible, the bonds were able to achieve a clear “greenium” due to the participation of international cross-over taxable buyers, which historically have been willing to pay greeniums for European green bonds. Although this is the only higher ed transaction that can demonstrate such a greenium relative to a non-green bond thus far, this deal is a clear indication of the potential for pricing differentials to eventually emerge in the municipal capital markets, in H2C’s view.

  • The Ohio State University issued $600 million in Series 2021A bonds (10) with a green bond designation. The bonds will help finance construction of a new inpatient hospital in Columbus, Ohio, that will promote energy efficiency and conserve water. 

  • The California Municipal Authority issued $75 million in Series 2022 municipal taxable green bonds (11) on behalf of the University of San Diego in Spring 2022. The bonds, which received an A1 rating from Moody’s Investors Service, will be used to finance the acquisition, construction, improvement, renovation, and equipping of certain educational facilities to be owned or operated by the university.

  • The University of Michigan issued $300 million in taxable green bonds (12)—the first for the university—in March 2022. The proceeds will help the university achieve its goal of becoming carbon neutral by 2040.

  • Harvard University issued $207.83 million in Series 2022B green bonds via the Massachusetts Development Finance Agency in April 2022. Proceeds from the bonds will finance and refinance construction of a Science and Engineering Complex and renovations to the Adams House and Soldiers Field Park housing; refinance outstanding commercial paper that provided a portion of the original financing for these projects; and pay costs of issuance. The projects are designed to meet the Harvard Green Building Standard, including achieving at least LEED Gold certification, with the complex receiving LEED Platinum and Living Building Challenge certification (13).

  • In May 2022, the Minnesota Higher Education Facilities Authority planned to issue more than $59.7 million in Series 2022A green bonds on behalf of the University of St. Thomas (14). Details regarding how the proceeds will be used were not yet released by May 2, 2022.

Colleges Embrace Green Bonds


Source: H2C Securities Inc. analysis.

How Green Bonds Are Financed

Bonds issued to support ESG projects can be issued with a designation label or without. To garner more interest from ESG-focused funds, a clear outline of the projects financed needs to be included in the offering document’s description of the use of proceeds. (See the section, “Key Action Items for Higher Education Finance Teams.”) Although the label can assist the underwriter in the marketing of the bond, it is not required from investors.

In addition, the rating agencies do not provide a distinct rating for an issuer’s ESG bonds. The rating agencies do incorporate ESG risks into their credit rating review, and these risks would be incorporated into the rating of an issuer’s rated bonds regardless of the designation of the bonds. While there is limited evidence to guaranty a price advantage for issuing ESG bonds over non-ESG bonds, given the trend toward more funds seeking to invest in ESG-related investments, it would be expected that increased liquidity in the secondary market would also support a pricing advantage.

Globally, investment bankers have detected a groundswell of interest in ESG products (see the exhibit below for the top 12 holders of Municipal ESG Bonds).

A Snapshot of the Top 12 Municipal Green Bond Holders

Screen Shot 2022-05-19 at 2.16.28 PM.png

Source: Bloomberg, LP and H2C Securities Inc. analysis; data as of 4/30/22.

The International Capital Market Association (ICMA) provides a global framework for not only issuing green bonds, but also evaluating these bonds from an investor’s perspective (17). Meanwhile, the Climate Bonds Initiative offers green bond market intelligence, policy models, standards, and advice (18).

The largest holders of green bonds are expected to increase their appetite as U.S. investors become more familiar with ESG concepts and demand more of such paper.

“There’s been a clear trend in recent years for ESG sustainability issues to be more in account in investment decisions,” Matthew Kirk, international affairs advisor for Patton Squire Boggs, shared during a recent webinar (15). As public interest in environmental protection rises, “Many investment funds have spoken about the importance of these issues when they are looking at the types of companies to invest in,” Kirk says. “There are also a number of moves in the regulatory sphere to increase and improve reporting in this area.”

Just a few years ago, “It was much harder to get a meeting based on ESG or sustainable investing or even impact investing,” says Julian Thatcher, partner, corporate for Patton Squire Boggs. Today, “We’ve really seen a flip and almost entire reversal of that,” he says. “Clients come to us asking about [ESG] investing—and in such a widespread way.”

While the move toward green bonds in higher education is still in its early days, the pressure on boards to set sustainability goals and incorporate ESG into their policies and strategies has intensified in recent years. At Berea College in Berea, Ky., which issued the first sustainability bond for not-for-profit higher education in Spring 2021, the $50 million bond will not only help fund existing capital projects, but also will create a facilities fund for future green investments that support the college’s mission (16). This type of sustained commitment to the environment is crucial at a time when investors, regulatory agencies, and the public expect forward momentum and results around ESG initiatives.

How Rating Agencies Assess ESG Initiatives and Risk

How do rating agencies take ESG benefits and risks into account? To date, rating agency ESG ratings have largely had a credit neutral impact for organizations. Currently, H2C is not seeing widespread rating changes based on issues related to ESG, but we anticipate ESG risk factors to be considered more by the rating agencies and investors in the future as ESG disclosure is more prevalent and ESG-focused projects become more common. 

Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings all consider whether ESG factors have a material influence on credit worthiness. “The materiality, time horizon and credit impact of ESG risks vary widely,” Moody’s states. “Issuers’ fundamental credit strengths or vulnerabilities can mitigate or exacerbate ESG credit impacts. In some cases, ESG-related benefits can be a credit strength.”

Because the process of evaluating the impact of ESG issues on an institution’s risk profile is complex, “Some ESG impacts, which are material to stakeholders, may generate risks and opportunities that are already or have the potential to become material to creditworthiness in the future,” S&P states. In some instances, “A risk or strength that we currently consider immaterial to creditworthiness can later become material,” such as when a federal policy change imposes higher costs for carbon dioxide emissions.

The move toward more consistent reporting standards for ESG is anticipated. Today, there is a “lack of a common baseline for disclosure standards” related to ESG across industries, according to S&P (19). In the year ahead, higher education institutions could see the introduction of reporting standards that establish a framework for more credible ESG disclosures as ESG-related standards continue to evolve. 

“Investors will likely demand more than simply setting long-term climate commitments,” S&P states. “We think governments and companies will have to provide credible, achievable near-term signposts on their path to decarbonization. And beyond the established focus on emission reductions, the spotlight will extend to how entities manage exposure to physical climate risks, including the presence and/or adequacy of adaptation and resiliency planning.” 

However, standardized ESG disclosures “would add quite the workload for issuers,” The Bond Buyer notes (20). Some experts believe this may be holding back more widespread growth in green bonds. Some institutions may adopt or incorporate ESG principles, but they may choose not to issue green bonds to avoid meeting ESG certification and reporting requirements. 

Key Actions for Higher Education Finance Teams  

How can higher education finance teams both support ESG initiatives from a mission and cost perspective? Following are key considerations.

  1. Assess the value of ESG initiatives before they are undertaken. Higher education. finance teams can help establish the basis for ESG investment by developing guiding principles for investment; assessing the areas of the organization where ESG initiatives can make the greatest impact; quantifying the potential impact of sustainability initiatives and their associated risk; and acquiring the systems and tools to report on ESG data, metrics, and key performance indicators. Such measures are already recommended for corporate issuance, particularly in Europe, where CEOs are incentivized based on ESG performance, according to KPMG (21). 

  2. Develop a framework for measuring and reporting the impact of ESG investments. Transparency around the results of ESG initiatives is key to maintaining public and investor trust. In its Green Bond Principles report (22), ICMA recommends detailing the current and expected environmental and social impact of individual projects as well as the institution’s entire ESG portfolio. The pro-rated share of ESG financing that each project received also should be reported, according to ICMA. 

  3. Integrate financial and nonfinancial data into reporting. In assessing the impact of ESG initiatives, select core indicators specific to the type of project undertaken (e.g., renewable energy, energy efficiency, waste management and resource efficiency). The Green Bond Principles report lays out a comprehensive array of core indicators to choose from.

  4. Look to rating agencies, the Disclosure Industry Working Group, and the International Sustainability Standards Board for guidance regarding disclosure. For instance, when it comes to assessing ESG-related risk, Moody’s states, “Where data are limited or missing for an issuer or transaction, including on a non-public basis, we typically place greater emphasis on other known characteristics (e.g., size, domicile or regulatory environment) or sector-level scores in considering whether the issuer’s exposure is likely materially different from the sector with respect to a particular E, S, or G category of risk. We would typically also consider whether the exposures of issuers or transactions where we do have information indicate that these exposures are homogeneous across the sector, or whether they vary quite widely. In the latter case, we would typically make an assumption regarding the issuer’s position on the spectrum of exposure of similar issuers or transactions, based on known characteristics.” 

During primary market disclosure, ICMA recommends municipal issuers disclose at least:

  • Proposed use of proceeds

  • The process for project evaluation and selection

  • Relevant information related to the issuer’s overarching sustainability strategy

  • The process for management of proceeds and reporting

Meanwhile, the GFOA—a lead member of the Disclosure Industry Working Group—recommends municipal issuers also (23):

  • Identify primary environmental risks for the municipal issuer

  • Discuss policy actions taken

  • Summarize information for an investor to gain a general understanding of response efforts

  • Include appropriate disclaimers or cautionary language to properly frame the discussion of environmental risks, which are inherently unpredictable

  • Ensure that the disclosure is reviewed with each bond offering to keep the information up to date and disclose any new events that have occurred as well as the response and impacts

The results of an MSRB survey on ESG practices (24) in the Municipal Securities Market also could inform changes in the marketplace. Topics covered by the survey include the disclosure of information regarding ESG-related risk factors and practices as well as the labeling and marketing of municipal securities with ESG designations.

Exploring Your Options? Contact Us

H2C will continue to monitor the use of ESG financing and provide updates on the benefits and costs for higher education and health care. To that end, H2C has begun to include ESG considerations in our strategic capital planning process. If your institution is evaluating the potential for ESG financing, including green bonds, H2C can help guide your finance team through this process. Contact us.


  1. Lorin, J., and Moran, D., “From Stanford to Oberlin, Schools Rush to Tap the ESG Bond Market,” Bloomberg, Jan. 28, 2022,

  2. Ibid.

  3. “Understanding ESG and ESG-related Risks,” Thomson Reuters, June 18, 2021,

  4. “Rethinking Carbon Neutrality in Higher Education,” Climate XChange, Dec. 8, 2021,

  5. “Is the Municipal Market Pointing Green?” Refinitiv, October 2021,

  6. Following the United Nations Intergovernmental Panel on Climate Change’s publication on humans’ effect on climate change.

  7. Petro, G., “Gen Z Is Emerging as the Sustainability Generation,” Forbes, April 30, 2021,

  8. Peacock, C., “Stanford issues first bond in U.S. higher education based on rigorous environmental stewardship and social responsibility standards,” Stanford News, May 4, 2021,

  9. “Oberlin College and Conservatory Secures $80 Million in Certified Climate Bonds for Sustainable Infrastructure Program (SIP),” Oberlin College & Conservatory, Aug. 3, 2021,

  10. “Ohio State bonds for the inpatient hospital project awarded Green Bond designation,”, Oct. 1, 2021,

  11. “California Municipal Finance Authority – Moody's assigns A1 to University of San Diego's (CA) revenue bonds; outlook stable,” Yahoo! March 30, 2022,

  12. Shields, Y., “University of Michigan's $2.1B deal has its first green and century bonds,” The Bond Buyer, March 3, 2022,

  13. Rosenberg, J.S., “Harvard Borrowing Goes Green,” Harvard Magazine, April 12, 2022,

  14. “Notice of Special Meeting,” Minnesota Higher Education Facilities Authority, April 22, 2022,

  15. “Why Are Investors Driving ESG and What Makes a Good Investment?” Webinar, Squire Patton Boggs, Jan. 12, 2022,

  16. Good, C., “ESG: Powering sustainable business models in Higher Education,” RBC, June 22, 2021,

  17. “Mapping to the Sustainable Development Goals,” ICMA,

  18. Climate Bonds Initiative,

  19. “Key Trends that Will Drive the ESG Agenda in 2022,” S&P Global, Jan. 31, 2022,

  20. Hussey, C., “MSRB’s ESG request for information begins to collect submissions,” The Bond Buyer, Feb. 4, 2022,

  21. “The role of finance in environmental, social and governance reporting,” KPMG, October 2021,

  22. “Harmonised Framework for Impact Reporting,” The Green Bond Principles, ICMA, June 2021,

  23. “ESG Best Practice: ‘E’ Environmental,” GFOA,

  24. “Request for Information on Environmental, Social and Governance (ESG) Practices in the Municipal Securities Market,” Municipal Securities Rulemaking Board, Dec. 8, 2021, 

About H2C Securities Inc. ("H2C")

H2C is a strategic advisory and investment banking firm committed to providing superior advice to healthcare organizations, higher education institutions, and related organizations throughout the United States. H2C’s professionals have a long track record of success in mergers and acquisitions, capital markets, and real estate transactions, acting as lead advisors on hundreds of transactions representing billions of dollars in value.

Securities and services offered through H2C Securities Inc., member FINRA/SIPC, a registered broker-dealer and an indirect subsidiary of Fifth Third Bank, National Association. All rights reserved. Securities and services offered through H2C Securities Inc.: Are Not FDIC Insured; Offer No Bank Guarantee; May Lose Value; Are Not Insured by any Federal Government Agency; Are Not a Deposit.


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The Authors

George Huang Headshot.png

George Huang

Executive Director


Emily Abrantes

Managing Director

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