Thursday, July 17, 2014

Climate Bonds Market Comes Of Age As Investors Buy In To Green Finance

This may be the year that climate bonds come of age. It’s an asset class that has grown up fast. In just a few years, the market for debt instruments that finance projects that help to tackle climate change, also known as green bonds, has increased hugely.
According to a new report, Bonds and Climate Change, The State of the Market in 2014, the amount of “labelled” green bonds has jumped from less than $4 billion in 2012 to $11 billion in 2013. By June 10 this year, $18.35 billion had already been issued and the market is on track to reach $50 billion by the end of the year and $100 billion next year.
“The Green Bonds era has begun,” states the report, issued by the Climate Bonds Initiative, a London-based organisation dedicated to bringing the market into the mainstream because “mobilizing bond markets as a low-cost financing tool will be essential for the realization of a low carbon and climate resilient economy”.
Labelled green bonds, those bonds where the money raised is allocated specifically to low-carbon projects – and verified to have done so – are the most high-profile part of the market but according to Sean Kidney, chief executive of the Climate Bonds Initiative, they are just “the visible part of the iceberg”.
Labelled bonds only make up about 10% of the total market, he says. As for the other 90%, there is a whole tranche of issuance that is climate-friendly but not labelled as such. The report says there are more than $500 billion of climate-themed bonds outstanding. “Many of these are railway bonds, which investors might not think of as climate bonds – but with transport emissions making up 23% of global emissions, anything that encourages modal shifts is a really big part of the solution,” says Kidney.
Highlighting this hidden part of the market is important because many investors are looking to invest in climate solutions but don’t know where to look, Kidney says. Showing investors that there is liquidity and scale in the market is important in attracting more people to invest and it also makes it easier for institutions to exit their investments. “The broader climate-themed universe is an indicator of where future bonds might be labelled,” he adds.
The Initiative screens bonds across seven key themes – Transport,Energy, Climate Finance, Buildings & Industry, Agriculture & Forestry, Waste & Pollution Control and Water. The climate bond market’s origins lie in the multilateral development banks such as the World Bank, the European Investment Bank and the InternationalMonetary Fund. Indeed, one of the most recent issues comes from KfW, the German development bank, which has just issued a €1.5 billion AAA 5-year green bond to help finance renewable energy projects. Like most climate bonds, it was oversubscribed.
Most of the climate bonds that have been issued so far have come from the multilateral banks because this is a new market and investors needed the deep pockets and AAA ratings of these institutions to give them the confidence to invest. Another key factor in the growth of climate bonds’ popularity has been that investors are not asked to pay a premium for them. “If you can invest in two bonds that offer the same return over the same period, but one of them allows you to tackle climate change at the same time, then why would you not do that?” says Kidney. “The issuer benefits are coming from diversification, not pricing.”
As the market grows, it is starting to attract a wider range of issuers, Bridget Boulle, co-author of the report, says. “In the coming year we will see growth in labelled Green Bonds from municipalities, cities and corporate issuers. We expect increasing demand from investors signed up to the Principles for Responsible Investment and the GlobalInvestor Coalition on Climate Change.”
Notable corporate issuers include DC Water, which recently issued a 100-year bond, Italian utility Hera, carmaker Toyota, Unilever , French utility GDF Suez and solar panel installer SolarCity.
One area that will become more important is standards for the asset class, Kidney adds. Because the money raised is meant to be earmarked for environmental projects, it is important that investors have confidence that this is the case. Almost two thirds of bonds issued since the start of 2013 have been independently reviewed and it is important to get that figure up, Kidney says. “You need to get a second opinion to verify the environmental criteria. In the absence of clear and widely accepted guidelines around what is green there is a risk of “greenwashing”, where bond proceeds are allocated to assets that have little or doubtful environmental value. This would shake confidence in the nascent market.”
Nonetheless, the market is well-positioned, he says. “Investors are concerned about climate change. This report shows how they can invest in climate bonds without risk. The investment opportunities we find are safe and secure investment grade bonds. This is a Dull Green Market – just how pension funds and insurance funds like it.”

Mike Scott

Founder at Carbon Copy Communications

Why We Stopped Focusing on Direct Social Media ROI: A New Way of Viewing Conversions

Measure Social Media ROIDo you measure the return on your social media investment?
It seems blasphemous not to, yet that’s exactly the direction we’re experimenting with at Buffer.
We’ve recently shifted our focus toward email list building along with continued traffic growth. These metrics are common enough; it’s what we’ve stopped measuring in lieu of email that is most unique and notable.
We no longer focus on social media ROI. It’s strange but true. We’re a social media blog that does not emphasize social media ROI in our stats and strategy. What gives? Let’s take a closer look.

What is social media ROI? A complicated definition

Defining social media ROI can be a bit of a thorny problem.
Tools and services have come along to help shed light on the numbers behind one’s social impact. Yet, choosing which numbers are best—engagement, clicks, conversions, etc.—is still highly debatable and quite unique to the individual.
There’s also the higher-level view of entering social media ROI from the right perspective. Gary Vaynerchuk has some interesting ideas on this.He challenges the traditional, linear view of ROI as a universal benchmark by pointing out that ROI is incredibly dependent on the user.
Social Media ROI gif
His full slide deck includes a handful of examples of the ways that ROI for most anything will vary based on the “mechanic.” For instance,
What is the ROI of the keyboard in my closet? Rather zilch for me. Millions of dollars for someone like Herbie Hancock.
What is the ROI of baking cupcakes? A few smiles for me. A few dollars for a bakery.
There are so many factors that go into ROI, as Vaynerchuck argues, that so often the answer for “What’s the ROI of X, Y, and Z” resorts to “it depends.”
As you can imagine, it’s hard to measure “it depends.”

How we think of social media ROI at Buffer

Before we get into this post too deep, let me define what I mean when I’m talking about social media ROI.
1. We have stopped focusing on conversions as a key metric for the blog. (More on this below.)
2. Our blog content is a key component to our social media strategy. Ninety percent of our social media updates are based on content we’ve written on the blog.
3. Therefore, the ROI for our social media updates can be defined as conversions from the blog. These conversions are the Return on the Investment of sharing content. Since conversions are no longer our number one focus, social media ROI takes a back seat.
Through this rethinking of ROI and metrics, we’ve taken a bit of a new view of social media from a slightly different perspective. Social media, first and foremost, is branding—and it is increasingly difficult to measure branding as a direct, one-to-one conversion. In many ways, you can no longer expect direct ROI from content marketing or branding. Tom Tunguz created an interesting graphic that shows how conversions and effectiveness change the further you get away from direct marketing and into content and branding.
Tom Tunguz marketing horizons

The simplest, shortest conversions happen with direct response. As you get deeper into content and branding, the conversion formulas change. They get more complicated.
We’re a team of 25—and a content team of two—so we find the scale of time, effectiveness, and conversion (as illustrated in the chart) to be a bit out of sync with our resources. Larger companies and agencies might be able to track this volume, but for us—and maybe for you—we’ve chosen to go a different route.
What makes measuring ROI for content so hard? Here’s our theory.

Where conversions and content diverge

It would seem that the most straightforward way to focus on social media ROI is to seek conversions. That is the mindset I took when I first started at Buffer and the one that I imagine most content creators and marketers ascribe to. Conversions are in our DNA, you might say.
Turns out, I wasn’t seeing the complete picture.
While conversions are tantamount to growth and revenue, the blog might not be the best place to measure them. There are other points along the journey from curious to customer that are better measured in terms of direct ROI. If you imagine this journey as a funnel, the blog is near the top, trying to collect as many eyeballs and as much interest as possible. Conversions tend to happen much later on in the process, further down the funnel, like in this example from Moz.

This was certainly my experience when I converted at Buffer. Here’s how it went:
  1. I found the Buffer blog via Facebook when someone shared Leo’s article about The Origin of the 8-Hour Work Day. It was a neat story, so I bookmarked the blog, thinking I’d come back later.
  2. I noticed Leo’s name at a couple other places online where he had guest blogged. Noticing this didn’t send me scurrying back to the Buffer blog; it just reinforced that Leo was an okay guy.
  3. Feedly mentioned that it had an integration with Buffer. Cool. I didn’t have a need for social media scheduling at the time, so I browsed Buffer’s other add-ons, grabbed a few ideas, and left.
  4. A couple weeks later, I was cleaning out my bookmarks and I found the Buffer blog bookmark. I stopped by for a visit and found a handful of more stories that sounded interesting to read. I loved them all.
  5. Around this time, I started a new side project and wanted to promote it a bit on social media. I thought automation would be an ideal way to go. I went to IFTTT to see what was available, and I saw they had a Buffer integration. A lightbulb went off.
  6. I googled “Buffer app.”
  7. I clicked on the result for the Buffer landing page, I liked its clean design and simple CTA, and I signed up on the spot.
In summary, my path to conversion went Facebook > Blog > Guest Posts > Feedly > Bookmarks > Blog > IFTTT > Google > Buffer landing page > Conversion!
My ROI Journey
Was the blog to credit for my joining Buffer? You bet. Do you think my conversion was reflected in the blog stats? Eh, probably not.
Rand Fishkin of Moz explained this conversion conundrum in detail with his slide deck “Why Content Marketing Fails.” He lists five reasons why content marketing might fail, beginning right off the bat with the problem of thinking that content has an instantaneous impact on conversion.
In reality, the process, according to Rand, is more like this:
how content marketing works
Kind of complicates measurement of ROI, wouldn’t you say? That’s the conclusion we came to on the Buffer blog. While it’s not impossible to track ROI and conversions through this multistep flow (some incredibly smart people and cool tools have figured it out), we found that our social media efforts to drive visitors to our content can be measured in other ways (see below). ROI is a tough nut to crack.

When it’s good to measure social media ROI

Last week, Unbounce published an article titled “Why Every Marketer Should Care About Conversion,” and seeing that headline made me stop in my tracks. I’m a marketer. Why don’t I care about conversion?
The answer is that I do care about conversions and ROI. It’s just that my conversions look a bit different than what most folks expect. In the Unbounce article, Three Deep Marketing’s Angie Schottmuller had this great quote:
“Marketing is a utility to facilitate action. Conversion is simply the completion of a presented action. Whether it’s buy now, call today, share socially or watch the video, all marketing content needs a purposeful call to action. If you’re not helping the user get to the next step in their decision-making process, what’s the point?
No marketing channels are exempt from being useful or actionable. Online or offline, from emails to print ads, a relevant, value-added call to action should always be included and optimized.”
By this definition, we are measuring conversions at the Buffer blog. We’re measuring how visitors convert to email subscribers.
I think it’s also good to point out that there are other ways of looking at social media ROI beyond an impact to the blog. Your social strategy might not be as content-heavy as ours. You may be promoting products or events, and these would fit a more traditional measure ROI and conversions. It might be best to track ROI when you’re sharing some of the following:
  • Landing pages
  • Event registration
  • New product announcements
  • Direct CTAs (like Twitter cards, for instance)

Ideas on what you might measure instead

At the Buffer blog, we’ve chosen to measure email signups as our key metric. Email signups give us an awesome opportunity to communicate directly with those who ask to hear from us. It’s quite the privilege! (While we’re at it, you can sign up here!) We feel that creating content that is of the utmost quality that folks are eager to see it arrive in their inbox is an awesome goal to shoot for.
With email signups as our number one goal, we’ve also taken a new look at a handful of other stats that might be worth tracking, too. There’s probably no escaping the measurement of blog traffic; in our case, as we grow traffic to the blog, we will also grow opportunities to collect more emails. Social shares remain important as well; we often cite the social proof of a well-performing article when we send out stories for blog syndication.
Here are a few other ideas that we’ve mulled over:
  • Time on site
  • Engagement with content
  • New visitors vs. returning visitors
  • Bounce rate
  • Pages per visit

Over to you: What do you measure?

Social media measurement is one of those topics that makes for endless points of view and fascinating discussions.
We’ve found that the traditional view of conversions doesn’t quite fit with our blog’s place in the conversion journey. Right now, we feel good focusing on retention through email signups and continued growth of traffic and shares. You may have a totally different strategy!
I’d love to hear your thoughts and strategy in the comments. What do you measure when it comes to social media and content marketing metrics, and how? How important is social media ROI?
P.S. If you liked this post, you might enjoy our Buffer Blog newsletter. Receive each new post delivered right to your inbox, plus our can’t-miss weekly email of the Internet’s best reads. Sign up here.
Image credits: pasukaru76Smart InsightsMozSlideShare

About the Author

Kevan Lee

Content crafter at Buffer. You can find me online, tweeting about my writing process, or at home, second-guessing football coaches. Live simply, give generously, beat cancer.