Green Bonds: Lasting Solutions For Climate Change
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Green Bonds: Lasting Solutions For Climate Change

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The following content is sponsored by IFC (World Bank Group)

green bonds infographic

Green Bonds: Lasting Solutions For Climate Change

How much will it cost to combat climate change? By some estimates, a staggering $50 trillion. And while this may seem like an impossibly daunting figure, you should know there is a solution to this financing gap: green bonds.

But having only been around for a little over a decade, they are still a relatively unfamiliar investment for many.

The above infographic from IFC explores the exciting world of green bonds, which are gaining serious traction in financial markets.

Green Bonds 101

To begin, green bonds are not that different from regular bonds. Both are debt instruments or fixed income securities that pool capital from investors for a specified project or objective. But while Fortune 500 companies issue bonds to generally enhance their bottom line, green bonds differ in their commitment to eco-friendly ventures and sustainability.

Here’s a closer look at the anatomy of bonds, including green bonds:

  • Yield: The fixed coupon rate as a % of the market value of the bond price.
  • Maturity: The predetermined length of the bond.
  • Credit Rating: The rating bonds receive to determine their riskiness and quality.
  • Bond Price: The price of the bond purchase (typically starts out in $1,000 denominations).
  • Coupon: The payment on the bond usually occurs in semi-annual or quarterly installments.

Unlike bonds which have been around for centuries, dating back to the Mesopotamian times, green bonds are still relatively new. And in this short time, they have been taking modern finance by storm.

Why Green Bond Offerings Are Accelerating

It has become practically impossible to ignore the conversation around climate change. And as of late, there appears to be a newfound sense of urgency due to the acceleration of natural disasters occurring. Thanks to rising global temperatures, infrequent and extreme weather events are becoming more frequent than ever before. For example, when compared to 1850-1900, heat waves occur almost 3x more often today.

Here’s a breakdown of extreme weather event occurrences, based on future projections for global temperature averages:

Extreme Weather Event1850-19001℃ (Today)1.5℃ (Future Projections)2℃ (Future Projections)4℃ (Future Projections)
Heatwave12.84.15.69.4
Heavy Rainstorm11.31.51.72.7
Drought11.72.02.44.1

Unfortunately, as it stands, global temperature increases show no signs of slowing. That said, these risks can also expedite the growth for the green bond market, especially since they’re a compelling investment.

The Investment Case For Green Bonds

Since 2018, green bonds have been an outperformer relative to the average returns from the global bond universe. With interest rates at near-century lows, and equity valuations at frothier levels, investors may see green bonds as an increasingly attractive route.

In some cases, the yield on green bonds goes upwards of 6%—4 percentage points greater than the 2% yield on 10 Year Treasury. Furthermore, 61% of green bonds are assigned a credit rating of ‘A’ or higher. This is an important feature given that the amount of high quality credit ratings have been capitulating since the 1990s.

Breaking Down Green Bond Issuance

Green bonds make up over half of the ESG investment universe and are being used primarily for transport and energy projects, which make up 35% and 29% of proceeds, respectively. Here’s how their total proceeds break down:

Type of Green Bond Project

Use of Proceeds (%)

Energy35%
Transport29%
Water11%
Building9%
Waste7%
Land5%
Other4%

To add to this, the U.S. represents the largest market by green bonds outstanding, followed by France and China. By currency, however, the Euro represents almost 60% of all green bonds.

Green Bond Growth: A Timeline

In a short time period, green bonds have experienced a rapid ascent into mainstream finance. The table below provides an overview of some of the major milestones achieved:

2010: IFC issues its first green bond through a $200 million private placement and becomes one of the earliest issuers of green bonds.
2010: IFC launches the Green Bond Program to unlock investment in private sector projects in emerging markets.
2013: IFC issues first $1 billion green bond, and then issues a second $1 billion green bond in the same year, helping to catalyze the market.
2014: Total green bond issuance more than triples to $37 billion.
2015: Green bond market hits $100 billion in cumulative issuance.
2017: Green bond market hits $250 billion in cumulative issuance.
2019: In September 2019, IFC crossed the $10 billion threshold in cumulative issuances under its own Green Bond Program.
2020: Green bond market reaches the $1 trillion milestone in cumulative issuance.
2021: As of June 30th, IFC has issued 178 green bonds in 20 currencies amounting to more than $10.5 billion.

In a little over a decade, green bonds have had a monumental rise from a market worth millions to $1 trillion in cumulative issuance.

The Next Decade: Where Do Green Bonds Go From Here?

Although issuance is at record breaking levels, this is still just the beginning. Green bonds have a substantial expected growth trajectory, especially when considering that the regular bond market is worth $128 trillion.

Climate change is often touted as humanity’s biggest challenge, ever. In the next decade, the green bond market can propel to a multi-trillion dollar market, and equip society with the much needed tools to address our changing global climate.

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Visualizing America’s Electric Vehicle Future

The U.S. is accelerating its transition to electric vehicles but obtaining the minerals and metals required for EVs remains a challenge. In this infographic, we explore America’s transportation future.

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Visualizing America’s Electric Vehicle Future

The U.S. is accelerating its transition to electric vehicles (EV) to address climate change. However, obtaining the minerals and metals required for EV batteries remains a challenge.

In this infographic from Talon Metals and Li-Cycle, we explore the country’s strategy to have vehicles, batteries, and key parts be made in the United States.

Then, we look at how this strategy could be fueled by domestic mining and battery recycling.

The All-Electric America

Gasoline-powered cars are one of the biggest sources of carbon pollution driving the climate crisis. As a result, the Biden Administration has set a target for EVs to make up 50% of all new car sales in the U.S. by 2030. Today, fewer than 1% of the country’s 250 million vehicles are electric.

In November 2021, Congress passed the Bipartisan Infrastructure Deal, which includes:

  • Replacing the government’s 650,000 vehicle motor pool with EVs.
  • Electrifying 20% of the country’s 500,000 school buses.
  • Investing $7.5 billion to build out a network of 500,000 electric vehicle chargers across the country.

The idea also has popular support. According to a poll, 55% of voters in the U.S. support requiring all new cars sold in their state to be electric starting in 2030.

However, rising EV sales are already driving demand for battery metals such as nickel, lithium, and copper, threatening to trigger a shortage of these key raw materials. So, does the U.S. have the raw materials needed to meet this rising demand?

Currently, the U.S. is import-dependent with large parts of the battery supply chain captured by China. Likewise, some essential metals for EVs are currently extracted from countries that have poor labor standards and high CO2 footprints.

Nickel in the Land of Opportunity

The Biden Administration’s 100-day review of critical supply chains recommended the government should prioritize investing in nickel processing capability.

Today, the only operating nickel mine in the U.S., the Eagle Mine in Michigan, ships its concentrates abroad for refining and is scheduled to close in 2025.

To fill the supply gap, Talon Metals is developing the Tamarack Nickel Project in Minnesota, the only high-grade development-stage nickel mine in the country. Tesla has recently signed an agreement to purchase 75,000 metric tonnes of nickel in concentrate from Tamarack.

Since the development and construction of a mine can take many years, recycling is considered an essential source of raw material for EVs.

The Role of Battery Recycling

Battery recycling could meet up to 30% of nickel and 80% of cobalt usage in electric vehicles by the end of the decade.

The bipartisan $1.2 trillion infrastructure bill already sets aside $6 billion for developing battery materials processing capacity in the United States.

By 2030, the U.S. alone is projected to have more than 218,000 tonnes of EV battery manufacturing scrap and 313,000 tonnes of end-of-life EV batteries per year, presenting a massive opportunity for recycling. Currently, Li-Cycle, a leading lithium-ion battery recycler in North America, can process up to 10,000 tonnes of battery material per year—and this capacity is set to grow to up to 30,000 tonnes by the end of 2022.

Li-Cycle also has a hydrometallurgy refinement hub under construction in Rochester, New York, which will process up to the equivalent of 225,000 EV batteries annually into battery-grade lithium, nickel, and cobalt when it is operational in 2023.

America’s Electric Vehicle Future

The auto industry’s future “is electric, and there’s no turning back,” according to President Biden. It’s expected that EV sales in the U.S. will grow from around 500,000 vehicles in 2021 to over 4 million in 2030.

With rising government support and consumers embracing electric vehicles, securing the supply of the materials necessary for the EV revolution will remain a top priority for the country.

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Retirement Spending: How Much Do Americans Plan to Spend Annually?

Retirement expenses can vary significantly from person to person. In this graphic, we show the range of expected retirement spending.

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Retirement Spending

Americans’ Expected Annual Retirement Spending

Planning for retirement can be a daunting task. How much money will you need? What will your retirement spending look like?

It varies from person to person, based on factors like your health, outstanding expenses, and desired lifestyle. One helpful trick is to break it down into how much you estimate you’ll spend each year.

In this graphic from Personal Capital, we show the expected annual retirement spending of Americans. It’s the last in a three-part series that explores Americans’ spending and savings.

The Range of Retirement Spending

To determine how much people expect to spend, we used anonymized data from users of Personal Capital’s retirement planning tool. It’s worth noting that these users are proactive regarding financial planning. They also have a median net worth of $829,000 compared to the $122,000 median net worth of the U.S. population overall.

Here is the range of expected annual retirement spending.

Expected Annual Retirement SpendingPercent of People
$10K1.3%
$20K3.3%
$30K7.5%
$40K9.8%
$50K5.2%
$60K12.7%
$70K10.2%
$80K6.4%
$90K9.1%
$100K5.4%
$110K1.5%
$120K9.7%
$130K1.5%
$140K2.8%
$150K2.2%
$160K0.9%
$170K0.4%
$180K2.7%
$190K0.7%
$200K0.8%
$210K0.5%
$220K0.2%
$230K0.1%
$240K1.6%
$250K0.3%
$260K0.2%
$270K0.1%
$280K0.1%
$290K0.1%
$300K0.7%
Over $300K2.1%

Users are a mix of single individuals and people in a relationship. In all cases, expected retirement spending is what the household expects to spend annually.

The most commonly-cited expected spending amount is $60,000. Interestingly, this is roughly in line with what Americans spend annually on their credit cards. This suggests that people may be using their current bills to help gauge their future retirement spending.

Median spending, or the middle value when spending is ordered from lowest to highest, falls at $70,000. However, average spending is a fair amount higher at $100,000. This is because the average is calculated by adding up all the expected retirement spending amounts and dividing by the total number of users. Higher expected spending amounts, some in excess of $300,000 per year, skew the average calculation upwards.

Of course, given their higher net worth, it’s perhaps not surprising that many Personal Capital users expect to spend larger amounts in retirement. How does this compare to the general population? According to the Bureau of Labor Statistics, Americans age 65 and older spend about $48,000 per year on average.

Chances of Retirement Success

Once you’ve determined how much you’ll spend in retirement, your next step may be to wonder if your savings are on track. Based on an assessment of Personal Capital retirement planner users, here is the breakdown of people’s chance of success.

Retirement Spending Chance of Success

The good news: more than half of people have an 80% or better chance of meeting their retirement spending goals. This means they have sufficient financial assets and are contributing enough, regularly enough, to meet their expected spending amount. The not so good news: one in five people has a less than 50% chance of meeting their goals.

This problem is even more troublesome in the overall U.S. population. Only 50% of people have a retirement account, and the Center for Retirement Research at Boston College estimates half of today’s workers are unprepared for retirement.

Setting Your Own Retirement Spending Goals

While seeing the goals of others is a starting point, your annual retirement spending will be very specific to you. Not sure where to start?

Financial planners typically recommend that you should plan on needing 70-80% of your pre-retirement income in retirement. This is because people generally no longer have certain expenses, such as commuting or childcare costs, when they retire. However, keep in mind your expenses could be higher if you still have a mortgage, encounter unforeseen medical expenses, or want to splurge on things like travel when you retire.

It requires some upfront planning, but being realistic about your retirement spending can give you confidence in your financial future.

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