In a further expansion of sustainable options for investors, Global investment manager Franklin Templeton announced that it has launched the Franklin Municipal Green Bond Fund. The new fund will invest in muni green bonds, including climate bonds, sustainability bonds and environmental impact bonds, seeking to maximize income exempt from federal taxes.
The new muni green bond fund will be managed by Daniel Workman and Nicholas Bucklin of Franklin Templeton’s Municipal Bond team. Workman said:
“We believe active management is critical for municipal green bond investors. In addition to applying credit research and identifying relative value opportunities, we perform due diligence to select authentic green bonds instead of solely relying on third party screens or labels that may not properly scrutinize the use of proceeds of a given green bond. We also look for opportunities to invest in unlabeled green bonds that use proceeds for clear environmental objectives.”
“The municipal green bond market is young and continues to evolve, and the growing market allows dedicated green bond investment portfolios to achieve diversification across sectors and issuers. For investors seeking to align long-term investment goals with their environmental values, we believe Franklin Municipal Green Bond Fund offers a compelling solution.”
According to Franklin Templeton, the managers will utilize the same fundamental, bottom-up research analysis employed throughout the team’s range of municipal bond strategies. The research team is organized by sector groups, and there is at least one research analyst covering every sector of the municipal market. Due to the fragmented nature of the market, each sector has its own distinct criteria—both quantitative and qualitative—that analysts use to evaluate the creditworthiness of a given issuer.
The fund will invest at least 80% of net assets in muni green bonds, from a universe of issuers including states, cities, municipal water and sewer enterprises, transportation systems, universities, and hospitals, among others. The firm stated that under normal market conditions, the fund will invest at least 80 percent of its net assets in municipal securities whose interest is free from regular federal income taxes. The fund also may have up to 100 percent of its assets in securities that pay interest subject to the federal alternative minimum tax.
Ben Barber, director of Municipal Bonds for Franklin Templeton Fixed Income, said:
“The muni green bond universe is expanding, and for investors, green bonds provide an opportunity to dedicate capital to projects and programs that have a defined environmental purpose. As demand builds from impact-focused investors and financial professionals, the limited inventory of offerings gives our team first mover advantage. As one of the largest municipal bond fund managers in the nation, our resources allow us to more completely analyze the space and better identify truly green projects.”