Toyota is allowing people to invest in “green vehicles” like the Prius and hybrid versions of the Camry and Avalon. Instead of investing in the company as a whole, if you feel strongly about supporting green vehicles you can take a financial stake in supporting them. There’s just one catch: you have to invest a lot of money.
The “Green Bond” is an asset-backed security designed to be invested in by investment bankers. In this case the assets are environmentally-friendly Toyota vehicles, and a security is just something that can be traded. Put them together and it creates a way for Toyota to raise money from investors for a particular type of asset. That money can go to research & development, lowering the cost of green vehicles to consumers, or a number of other options.
So, who’s buying this asset-backed security? Citi Group, Bank of America Merrill Lynch, Morgan Stanley, BNP Paribas, Credit Agricole, JP Morgan, and Mizuho have all been involved. The Green Bond was initially valued at $1.25 billion, but initial demand by bankers was so high that it had to be revalued at $1.75 billion so everyone could get a piece.
If the phrase asset-backed security sounds familiar to you, that’s because it was in involved the, ahem, economic occurrences of the past few years. Citigroup’s chief of environmental investment thinks that green bonds could become a $700 billion to $1.4 trillion business within a decade, but that’s probably because his job is tied to the idea.
We feel good about Toyota’s green bond because the assets that all the investing will rest on—cars like the Prius, Camry Hybrid and Avalon Hybrid—are excellently made with years of success. A surge in capital will help Toyota to make them even cooler so that customers will get increasingly well-made cars that offer new and exciting features. We look forward to it.
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