Quantifying the impact of green bonds: using life-cycle assessment to measure comprehensive financial and environmental return on investment

Green bonds are increasingly being used as a tool to finance projects related to climate change mitigation. Yet despite both a dramatic growth in demand and improving policy standards, there remains a gap between the activities these bonds finance and the quantification of their associated greenhouse gas (GHG) reductions. We present a new framework to help overcome these challenges, one that combines life-cycle assessment of impact reduction activities alongside traditional financial return on investment (ROI) metrics. We provide an example of this approach by quantifying both the potential financial and GHG return on a billion-dollar investment in anaerobic digesters, biochar facilities, and solar energy for the Minnesota dairy industry. Our results illustrate clear financial and GHG tradeoffs of alternative project investments and our discussion highlights how our new approach aligns with emerging policies, such as the EU Green Bond Standard, that aim to reduce greenwashing and achieve authentic GHG reductions.