3 ways green debt products are good for your portfolio
Kermit the Frog famously said “It's not easy being green,” but when it comes to making green investments we’d have to disagree. Green debt is a quickly emerging investment product that helps finance renewable energy projects.
The most popular of these are AAA rated World Bank Green Bonds, but unfortunately these are inaccessible to most investors. Mosaic Notes are another green debt product that offer the advantages of green debt to average investors. Here are three reasons green debt products are making it easy to be green.
1. Green debt products are less risky than green equities
By anticipating the trend of growing renewable energy generation, some investors have seen the writing on the wall and have made very successful bets on companies like Tesla (Nasdaq: TSLA) and Solar City (Nasdaq: SCTY). For every success story, though, there are other companies such as those in the manufacturing sector that have suffered and declared bankruptcy.
Investing equity in any emerging industry including solar remains a risky business, but green bonds and solar debt products used to finance renewable energy projects have much lower risk. Debt has seniority in the capital structure over equity stakeholders, meaning debt-holders get paid first and get preferential claim on the assets compared to equity stakeholders during bankruptcy. Because of this added security, debt products often yield less than equity investments, but that doesn’t mean the return isn’t good for the risk being taken.