ESG Municipal Bonds: The Next Sustainable Opportunity
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ESG Municipal Bonds: The Next Sustainable Opportunity

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The following content is sponsored by Wells Fargo Asset Management.

ESG Municipal Bonds: The Next Sustainable Opportunity

When you think of sustainable investing, does your mind immediately go to stocks? Sustainable investing may have started in equities, but it’s now expanding into a variety of specialized asset classes—including municipal bonds.

In this infographic from Wells Fargo Asset Management, we highlight the growth of ESG (environmental, social, governance) municipal bonds and how investors can identify them.

A Growing Shift to ESG Bonds

Over the past decade, ESG municipal bond issuances have had a compound annual growth rate (CAGR) of more than 70%.

YearGreen and social municipal bond issuance
2011$164M
2012$237M
2013$332M
2014$2.1B
2015$4.8B
2016$7.8B
2017$11.2B
2018$4.8B
2019$11.7B
2020$19.7B

Source: Morgan Stanley Research, Bloomberg

Issued by state and local governments, these bonds often have a positive impact on society or the environment. For example, ESG municipal bonds can be used for affordable housing or renewable energy.

Which factors are propelling their growth?

  • COVID-19
    Amid pandemic-related volatility, credit rating agencies have highlighted the importance of non-financial risk factors. From April to November 2020, 33% of credit rating actions among U.S. public finance entities were related to ESG. To mitigate risks, a growing number of investors are adopting sustainable strategies.
  • Social movements
    Calls for equity have put a focus on investing in underserved communities, such as those with low-income populations or higher proportions of people of color. ESG municipal bonds can help finance initiatives such as accessible education, access to basic services, and quality healthcare.
  • Climate change adaptation
    Many municipalities are exposed to physical risks such as flooding and fires, but few currently disclose them. As a result, there is a push for issuers to provide more disclosures, and explain how their bonds will mitigate these risks. For example, a municipality facing flood risk could issue a bond to upgrade storm water management.

It’s clear that global trends are accelerating the shift to ESG municipal bonds. But how can investors determine which bonds are sustainable?

Identifying ESG Municipal Bonds

Traditionally, investors can seek green or social-labeled bonds—but these securities only make up 2% of the market. Investors who follow this approach have been missing substantial opportunities, as many sustainable bonds don’t have a green or social label.

Fortunately, there’s another option. Investors can follow Wells Fargo Asset Management’s (WFAM) positive impact framework, which includes sustainable bonds if they meet at least 1 of 3 main criteria.

  1. Use of proceeds: Are the bond’s proceeds used for a project that offers tangible environmental or social benefits?
  2. Issuer ESG Impact: Does the bond issuer provide environmental or social benefits through their services or operations?
  3. Underserved population: Does the bond issuer serve an underserved population group?

By applying the positive impact framework to an existing municipal bond portfolio, more than two-thirds of the bonds demonstrated positive sustainability attributes.

How does this approach work in practice? Consider two bonds issued by the same county.

 Bond ABond B
TypeGeneral obligation*General obligation*
Use of proceedsFlood control infrastructureSports stadium enhancements
Sustainable outcomes expected?YesNo

*General obligation bonds are backed by the credit and taxing power of the issuer, rather than from the revenue of a specific project.

While both are general obligation bonds, only the bond expected to drive sustainable outcomes (Bond A) is included.

New Opportunities

Using this framework, investors can go beyond labels to identify a wide array of ESG municipal bonds. Not only that, the ESG municipal bond market is expected to grow, from a total issuance of $19.7 billion in 2020 to a projected $30.0B in 2021.

Issuance of ESG municipal bonds is likely to increase to supplement federal financing. The Biden Administration has pledged a $2 trillion dollar investment in sustainable infrastructure, including water systems and roads & bridges. New, greener opportunities are on the horizon.

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Value in the Ground: Cartier Resources’ Chimo Mine Project

Cartier Resources (TSX-V: ECR) is advancing the Chimo Mine Gold Project in the Abitibi region of Quebec, showing its potential with past producing mines.

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Value in the Ground: Cartier Resources’ Chimo Mine Project

The sponsor of this graphic, Cartier Resources (TSX-V: ECR), has instigated an exploration strategy to increase ounces in the ground at the historic Chimo Mine in the heart of the Abitibi that continues to deliver increasing resources.

Cartier is deploying the strategy in the right region, with the right backers to find gold faster at a lower cost. This graphic provides an overview of the project’s massive potential.

Proven Endowment: The Abitibi Greenstone Belt

There are many prolific past-producing gold districts in Canada, but the Abitibi is one of the largest and well understood gold-bearing regions with readily available exploration infrastructure.

This region extends from Wawa in Northwestern Ontario to the East near Val-d’Or, Québec—a landscape that hosts some of the most productive gold mines in Canada.

Cartier’s Chimo Mine project located in the historic Abitibi Greenstone belt of Québec builds on a legacy of gold production with a project ready for investors.

Tried and Tested Exploration Strategy

The best place to find gold is where companies discovered and mined it before. Between 1964 and 1997, three companies produced 379,012 ounces of gold at the Chimo Mine.

This type of strategy is known as brownfield exploration. Brownfield exploration looks for gold in areas known to host gold mineralization. It offers investors less risk, reducing the amount of uncertainties a company faces.

Ounces in the Ground: Growing a Gold Resource

Cartier delivered its first-ever resource estimate within three years and proved the value at Chimo. In November 2019, the company published its first mineral resource estimate of the central gold corridor on the Chimo Mine property.

It reported Indicated resources of 481,280 ounces of gold and Inferred resources of 417,250 ounces of gold. This resource estimate came from only one-third of the property.

This was just the beginning for Cartier Resources and the Chimo Mine.

In 2021, Cartier upgraded its resource estimate with drilling from its North and South corridor. The company increased the indicated resources to 684,000 oz Au (6,616,000 tonnes at 3.21 g/t Au) and the inferred resources to 1,358,000 oz Au (15,240,000 tonnes at 2.77 g/t). This gives the property over 2 million ounces of gold in the heart of the Abitibi.

Why Invest in Chimo?

Cartier Resources has consistently applied an exploration strategy to develop and increase the known gold resources at the Chimo gold mine.

It built on the foundations of a proven past producer and continued exploration success to discover more gold. In the heart of a safe and established mining jurisdiction, Cartier has put the Chimo Mine back on the Abitibi gold map.

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Visualizing the Rise of Cryptocurrency Transactions

As cryptocurrency transactions rise, merchants are looking to position themselves to take advantage of this new wave of crypto spenders.

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daily crypto transactions

Visualizing the Rise of Cryptocurrency Transactions

After Bitcoin and cryptocurrency’s wild bull run in late 2020 and early 2021, many holders are now using cryptocurrencies for their intended purpose: payments.

Every day, approximately $12 billion are transferred across the Bitcoin, Ethereum, and Litecoin blockchains, with millions of people using cryptocurrency for payments daily.

This graphic sponsored by CoinPayments looks at the rising transactions of the Bitcoin, Ethereum, and Litecoin networks.

Cryptocurrency Transactions are Rising in Value and Number

While prices are often the focus when crypto is in the spotlight, transaction counts show how much a network is being used as a medium of exchange. In just over five years, daily transactions across the Bitcoin, Ethereum, and Litecoin networks increased sixfold, from just 250,000 to more than 1.5 million transactions a day.

In mid-2017, Ethereum overtook Bitcoin in daily transactions as ETH was necessary to participate in ICOs (initial coin offerings), which fueled much of the speculation in the 2017 price run. With Ethereum still hosting thousands of ERC-20 and ERC-721 tokens on its blockchain today, its transaction counts have grown to be much higher compared to Bitcoin and Litecoin’s.

Along with crypto’s rising transaction numbers, the average USD value per transaction has increased by a minimum of 4x over the past five years.

YearAverage Value per Bitcoin TransactionAverage Value per Ethereum TransactionAverage Value per Litecoin Transaction
2016$2,426$588$1,357
2021$32,943$19,139$5,458

Source: Coin Metric
2021 figures as of July 13th, 2021

Crypto Spenders are Searching for Merchants

As transaction counts and values rise, merchants play a vital part in pushing forward the adoption of digital currencies for payments.

Many cryptocurrency users consider merchant adoption as a key barometer of success for crypto adoption. While companies like AT&T, Namecheap, and Overstock already accept crypto payments, there are still many businesses around the world which don’t offer cryptocurrency as a method of payment.

In a survey of over 8,000 U.S. consumers, 66.7% of crypto owners and 54.2% of non-owners said that not enough merchants accept cryptocurrency. Along with this, 47% of crypto owners said they seek out merchants that accept crypto for purchases, indicating clear demand for more crypto-accepting businesses.

How Can Merchants Make the Most of the Crypto Boom?

As the world embraces crypto, merchants need the in-store and online tools to be part of this next wave of commerce. Accepting crypto opens merchants up to an untapped audience of new consumers, eager to spend their crypto.

CoinPayments makes it easy to start accepting crypto payments at online checkout and with POS systems, with features like auto-coin conversion and over 2,000 coins supported.

Find out more about how the crypto market is growing, adapting to consumer needs, and the opportunity it presents to merchants around the world.

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