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Climate change, a rising tide affecting the muni market

By Sarah Wynn
Published January 08 2019, 12:45pm EST

WASHINGTON — Portfolio managers are feeling the heat when it comes to investing in bonds that could potentially be affected by climate change.

Climate change has long been a point of political and social contention, and investors are throwing caution to the wind when making important bond transactions, while using a green thumb to do their part.

With his clients, Mousseau said he discusses climate and infrastructure, especially when it comes to residential developments along the coast.

“Just as a matter of policy, we generally try to avoid credits that are particularly vulnerable along any coasts,” Mousseau said.

Instead, he believes in diversifying by owning county bonds or multiple types of utility bonds, as opposed to smaller general obligation bonds that could get wiped out by a hurricane.

Mousseau said there will be an increase in green bonds — bonds used specifically for climate and environmental projects —and more institutional clients are starting to ask for them.

“I think there’s a heightened sense of people wanting to be involved in investments that benefit the environment and I think that grows every year,” Mousseau said.

Millennials, in particular, have shown interest in green bonds, which could cause a rise in issuance.

Development has increased in energy market countries and Mousseau believes green bond initiatives will become more important.

“All I’m saying is that the idea of green bond initiatives is certainly not stopping here,” he said.

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