May 23, 2022

Volume XII, Number 143


May 23, 2022

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Health Care Providers: Considerations with Green Bonds Issuance

As “Green Bond” designations become more prevalent in the public finance market, many health care providers are asking:  Are Green Bonds Right for Me?  Not all transactions are able to achieve designation as Green Bonds, because the need to finance particular assets – or refund them – may extend to assets that do not meet the requirements for designation.  However, there are a few considerations:

  • Without respect to any pricing benefit, bonds designated as Green Bonds may help to advance the sustainability goals of a health system’s ESG program.

  • Bankers do seem to be divided on whether there is a pricing benefit to issuing Green Bonds – although the market for Green Bonds is not yet mature.

  • At present, the taxable market seems to be providing better pricing for Green Bonds, although your investment banker or financial advisor should be able to quantify the pricing benefits.

  • More funds and investors are also looking at Green Bonds as a means to accomplish internal ESG program, which is leading to a more diverse base of investors and the creation of new funds willing to invest in Green Bonds.  This argues for an increased pricing benefit going forward.

  • Health care providers that issue Green Bonds need to be aware of four core components of the Green Bond Principles as published and administered by the International Capital Markets Association (ICMA).  In June 2021, the ICMA issued its updated Green Bond Principles:  Voluntary Process Guidelines for Issuing Green Bonds.

    • Use of Proceeds – may require 100% of the projects be eligible in order to designate bonds as “Green Bonds;” noting that there is some difference of opinion around this point and will be a topic for discussion in your transaction

    • Process for Project Evaluation and Selection

    • Management of Proceeds

    • Reporting

      • Issuers should make, and keep, readily available up to date information on the use of proceeds to be renewed annually until full allocation.

      • The annual report should include a list of the projects to which Green Bond proceeds have been allocated.

      • Transparency is key:  should consider including the use of qualitative performance indicators and, where feasible, quantitative performance measures

      • Templates provided through ICMA

Green bonds are an exciting new area for many health care providers and certainly should be discussed as part of the planning for both tax-exempt and taxable financings, especially for those transactions involving new building projects.  We anticipate Green Bonds are here to stay for the near future.  Whether Green Bonds become a permanent fixture on the tax-exempt scene is yet to be known.  But with the market’s focus on ESG, Green Bonds have an exciting future.

© 2022 Foley & Lardner LLPNational Law Review, Volume XI, Number 285

About this Author

Laura Bilas, Foley Lardner Law Firm, Business and Finance Attorney

Laura L. Bilas is a partner and business lawyer with Foley & Lardner LLP. She is the chair of the firm’s Public Finance Practice and her practice is concentrated on public finance and structured lending matters. Ms. Bilas’ experience includes serving as bond counsel, borrower’s counsel, underwriter’s counsel, and credit enhancement provider’s counsel for numerous public finance and other structured transactions, including general obligation, special service area, special assessment, tax increment, multi-family housing, health care and industrial development...

Heidi H. Jeffery, Foley Lardner, Municipal Finance Transaction Lawyer, private activity bond Attorney

Heidi H. Jeffery is a partner and business lawyer with Foley & Lardner LLP. Ms. Jeffery has experience in general municipal, private activity bond, housing, student loan, health care and senior living finance. In such transactions, she has served as bond counsel and counsel to developers, underwriters, credit enhancers, issuers and borrowers. Ms. Jeffery is a member and former vice chair of the firm’s Senior Living Team. She is also a member of the firm’s Finance & Financial Institutions, Health Care Finance, and Public Finance Practices and the Health Care...

Mark T. Schieble, Foley Lardner, Public Finance Lawyer, Tax Exempt Organizations Attorney, San Francisco,

Mark T. Schieble is a partner at Foley & Lardner LLP. He is a member of the firm’s Taxation and Public Finance Practices and its Health Care Industry Team. His practice encompasses both nonprofit and for-profit tax law. Representative matters include qualification and ongoing activities of tax-exempt organizations, tax-exempt finance, joint ventures, business reorganizations, employee benefit and deferred compensation arrangements, and real estate transactions.

In addition to federal income tax matters, Mr. Schieble also routinely counsels...

Dana Lach, Foley Lardner Law Firm, Business and Healthcare Attorney
Of Counsel

Dana M. Lach is of counsel and a business lawyer with Foley & Lardner LLP, where she counsels health care and cultural and educational facilities in connection with financing transactions, including tax-exempt bonds, commercial loans and on traditional financing products such as commercial paper programs and securitizations, and derivative transactions. In addition, Ms. Lach routinely serves as counsel to investment banks, commercial banks, and other financial institutions in connection with tax-exempt financing transactions. Ms. Lach’s experience as bond counsel,...

Heba Hazzaa business finance lawyer Foley Lardner

Heba Hazzaa is an associate and business lawyer with Foley & Lardner LLP. She is a member of the firm’s Finance Practice.

Prior to joining Foley, Heba was a student attorney at the Law & Entrepreneurship Clinic at the University of Wisconsin Law School.

In Cairo, Heba was an of counsel in the dispute resolution and arbitration practice group at Matouk Bassiouny.