“Green” investments and “green” bonds are here, but they are controversial.
Clemson economist Bruce Yandle suggests in Regulation that libertarians and conservatives are understandably worried about the impact of the “soft regulatory power” that is being applied to companies—or threatening to do so.
The world’s biggest fund manager, BlackRock, says it will consider the environmental and sustainability activities of companies it invests in. The Sustainability Accounting Standards Board wants environmental standards. The SEC is weighing in on what companies mean when they say they are “green.”
But maybe the critics are too pessimistic. Writes Yandle:
- “After all, if investors are truly willing to pay more for greener investments,the cost of capital will fall for the firms they favor, causing an expansion of, say, a popular tree-planting program or investment in the developing world. If buyers will pay more for green bonds, the cost of debt will fall for cities and states seeking to replace older infrastructure with cleaner technologies.”
- “And if these things begin to occur systematically, then we may one day see this market-driven environmental movement bear significant fruit.”
- “This isn’t the time for more SEC regulation of green investments. Rather, it’s a time for independent rating organizations such as Moody, Fitch, and Standard & Poor to rise to the challenge and help verify promised outcomes, environmental and otherwise.”
- “What we may be observing, finally, is a new day when free markets deliver cherished environmental outcomes that are proving to be exceedingly difficult for governments to achieve alone.”
Read more about Bruce Yandle.