Connect with us

Hi, what are you looking for?



Toyota Issues Green Bonds To Drive Efficient Vehicles

By James Lester

Toyota recently issued the world’s first “green bond” of asset-backed securities in the auto industry. The $1.75 billion bond’s net proceeds will be used to acquire retail installment sale contracts and lease contracts to finance new Toyota and Lexus gas-electric hybrid or alternative fuel powertrain vehicles. The bond has multiple tranches, each at a different (Moody) ratings levels: A2 tranche, A3, and A4.

Asset-backed bonds such as these allows banks and companies to sell ‘green’ loans and assets to the growing pool of investors looking for low-risk bonds with additional green and/or climate impact. In addition, these types of auto-backed bonds will allow companies such as Toyota to get better financing mechanisms in place for getting their hybrid, electric and alternative energy cars out to the masses. The vehicle models qualifying for the green bond include the Prius Liftback, Prius c, Prius v, Prius Plug-in, Camry Hybrid, Avalon Hybrid, RAV4 EV, and the Lexus CT 200h and ES 300h.

Originally, the bond was set at $1.25 billion, but Adam Stam, Manager, ABS & Structured Finance with Toyota Financial Services (TFS), told Cleantech Finance that demand was high and it was quickly oversubscribed. TFS has been looking at more ways to diversify its portfolio after a Diversity & Inclusion Bond that was announced in early 2013 and, with its new green bond, TFS is offering something for the growing number of investors who are looking for investment opportunities in green bonds. Stam also added that Toyota’s leadership position as an environmental and sustainability leader in the auto industry provided motivation for the issue as well.


Toyotae RAV4 EV. Image courtesy of Toyota Motor Corp.

The cars included in the green bond will be required to meet standards of energy efficiency in regulations set by the California Environmental Protection Agency’s Air Resources Board. The standards mean that the vehicles must meet certain “powertrain, fuel efficiency and emissions” criteria, including a minimum EPA estimated MPG (or MPG equivalent for alternative fuel vehicles) of 35 city / 35 highway. In addition, vehicles that meet the California Low-Emission Vehicle II (LEV II) certification of super ultra-low emission vehicles (SULEVs) or higher are included as well. This standard includes partial zero emissions vehicles (PZEVs) and zero emissions vehicles (ZEVs).

Green bonds are an area Toyota will continue to pursue in order to meet surging customer demand. Stam commented that this was TFS’ largest asset-backed security issue since 2010. The green bonds appealed to both traditional institutional investors and new investors as well. Toyota also believes that the proceeds will allow more consumers to be eligible for quality financing options for its hybrid, electric, and alternative fuel vehicles, furthering its commitment to sustainability.

Citi led the issue, along with Bank of America Merrill Lynch and Morgan Stanley. BNP Paribas, Credit Agricole, JP Morgan, and Mizuho are co-managers. All of the institutions involved in Toyota’s green bond helped create the Green Bond Principles. The Principles serve as voluntary guidelines that recommend issuers disclose information that is important to investors, including use of proceeds, process for project evaluation and selection, and management of proceeds. This process intends to promote the development of the green bond market and help investors evaluate the environmental impact of bonds.

Last week, the original group of financial institutions released its governance framework, which will allow for diverse stakeholder input into the Principles, provide effective oversight, and support their further development. The governance framework sets out the membership eligibility, which requires organizations to have issued, underwritten, or invested in Green Bonds, and admits others in the field of green finance as observers. It establishes an executive committee, which will include underwriters, issuers, and investors with global geographic representation.

“With growing interest among investors and consumers in clean transportation and environmentally beneficial assets, we believe there is a tremendous opportunity to help more investors get the information they need to make green investment decisions,” said Tyler Dickson, Global Head of Capital Markets Origination at Citi.

Don’t expect the issuance of green (or climate, as they are often referred to) bonds to slow down anytime soon. As the issuance by TFS shows, the demand for these types of investments is enormous, as investors oversubscribe in record time in almost every case.

About the Author: James Lester is an energy and impact investing expert with over a decade of experience in energy finance, public policy, and measuring social and environmental impacts (SEI). He has authored a number of articles, publications, and research reports that provide sources and tools needed to promote investment in clean energy. He is Managing Consultant at Cleantech Finance and lives in Boulder, CO. Follow James on Twitter @cleantecfinance and @Impact_Invest0r.

I don't like paywalls. You don't like paywalls. Who likes paywalls? Here at CleanTechnica, we implemented a limited paywall for a while, but it always felt wrong — and it was always tough to decide what we should put behind there. In theory, your most exclusive and best content goes behind a paywall. But then fewer people read it! We just don't like paywalls, and so we've decided to ditch ours. Unfortunately, the media business is still a tough, cut-throat business with tiny margins. It's a never-ending Olympic challenge to stay above water or even perhaps — gasp — grow. So ...
If you like what we do and want to support us, please chip in a bit monthly via PayPal or Patreon to help our team do what we do! Thank you!
Sign up for daily news updates from CleanTechnica on email. Or follow us on Google News!

Have a tip for CleanTechnica, want to advertise, or want to suggest a guest for our CleanTech Talk podcast? Contact us here.

Written By

We publish a number of guest posts from experts in a large variety of fields. This is our contributor account for those special people, organizations, agencies, and companies.


You May Also Like

Clean Transport

A new type of autonomous electric train is on track to electrify the US freight rail network and push diesel trucks off the highways,...


Extreme weather events, cybersecurity threats and volatility in energy markets at all levels puts intense strain on America’s power grid. Virtual power plants (VPP)...

Clean Power

Big news for clean air last week. The Bay Area Air Quality Management District (BAAQMD) adopted amendments requiring the elimination of nitrogen oxide (NOx)...

Clean Power

Steel, like concrete, is such an integral part of our world that we rarely notice it. From wherever you are reading this, I guarantee...

Copyright © 2023 CleanTechnica. The content produced by this site is for entertainment purposes only. Opinions and comments published on this site may not be sanctioned by and do not necessarily represent the views of CleanTechnica, its owners, sponsors, affiliates, or subsidiaries.