Green Bonds and Carbon Offsets

A. Green bonds

Key

• Average Weekly Return (in %): mean of weekly returns
• Volatility (std dev of weekly returns, in %): a measure of consistency
• Cumulative Return (in %): total return over the period
  

Analysis and Links for where to buy

Key distinctions

1. Currency exposure
   – BGRN is multi‑currency (but USD‑hedged), letting you access bonds in EUR, GBP, etc., while managing FX risk.
   – GOGR and GRNB are pure USD ETFs, eliminating cross‑currency swings but foregoing non‑USD yield opportunities.
   
2. Index construction & green definition
   – BGRN & GOGR use MSCI’s green‑bond indices, which apply strict “use‑of‑proceeds” and exclusion screens on revenue.
   – GRNB tracks an S&P index with bonds certified by the Climate Bonds Initiative.
   – NUBD isn’t a pure green‑bond fund but an ESG‑screened aggregate: it covers all sectors of the U.S. bond market, excluding the lowest‑scoring issuers.
   
3. Issuer types
   – BGRN includes a broader set of issuers—sovereigns, local authorities, supranationals and corporates—across geographies.
   – GOGR & GRNB focus on USD‑denominated green bonds, but GRNB emphasizes certification via an independent NGO (Climate Bonds Initiative).
   – NUBD covers government, corporate and securitized debt without a green‑only requirement, instead using ESG ratings.
   
4. Diversification vs. impact purity
   – Green‑bond ETFs (BGRN, GOGR, GRNB) deliver “pure‑play” climate‑financing exposure but at the cost of a narrower investable universe.
   – NUBD offers deeper diversification across the entire U.S. aggregate market, with only an ESG overlay.
   
5. Use cases
   – To accentuate environmental impact within a fixed‑income sleeve, choose one of the green‑bond ETFs.
   – To blend ESG considerations into a core bond allocation without sacrificing broad market exposure, NUBD is more appropriate.

Best Bonds to Hold in Different Investor Scenarios 

(Analysis from 2024 – 2025 Financial Year)

1. Short-Term Investor (holding for about 1 month) 

Best bond: BGRN (iShares USD Green Bond ETF)

• BGRN gives an average return of 0.12% per week.
• Over 4 weeks (about a month), that adds up to 0.48% return.
• It’s also very stable with small price movements, so it’s not too risky.
• Annual return 6.24%
  

Initial Investment

• You invest 1,000,000 KSh.
• The exchange rate is 1 EUR = 147.25 KSh.
• This means the initial  investment is equivalent to 6,791.17 EUR (1,000,000 ÷ 147.25).

Annual Return Calculation

• BGRN gives a weekly return of 0.12%.
• Over 52 weeks (1 year), this adds up to 6.24%.
• Your profit in Euros would be 423.77 EUR (6,791.17 × 6.24%).
• The total value of your investment after 1 year is 7,214.94 EUR (6,791.17 + 423.77).

Convert Back to KSh After 1 Year

Scenario 1: No Change in Exchange Rate (147.25 KSh/EUR)

• If the exchange rate stays the same, 7,214.94 EUR becomes 1,062,400 KSh (7,214.94 × 147.25).
• Your net return is 62,400 KSh (1,062,400 − 1,000,000).
• The percentage return is +6.24%.

Scenario 2: KSh Appreciates by 10% (132.525 KSh/EUR)

• If the KSh strengthens by 10%, the exchange rate becomes 1 EUR = 132.525 KSh.
• Your investment would now be worth 956,160 KSh (7,214.94 × 132.525).
• Your net return is a loss of 43,840 KSh (956,160 − 1,000,000).
• The percentage return is −4.38%.

Scenario 3: KSh Depreciates by 10% (161.975 KSh/EUR)

• If the KSh weakens by 10%, the exchange rate becomes 1 EUR = 161.975 KSh.
• Your investment would now be worth 1,168,640 KSh (7,214.94 × 161.975).
• Your net return is 168,640 KSh (1,168,640 − 1,000,000).
• The percentage return is +16.86%.

Summary of Outcomes

Why BGRN is best here:
Small but steady profit, low risk—great for short holding.

2. Long-Term Investor (holding for at least 1 year) 

Best bond: NUBD (Nuveen ESG US Aggregate Bond ETF)

• NUBD gives an average of 0.15% return per week.
• Over 1 year (52 weeks), that adds up to about 8.3% total return.

Initial Investment

• KSh: 1,000,000
• Exchange Rate (in): 129.40 KSh/USD
• USD Equivalent: 1,000,000 ÷ 129.40 = 7,727.98 USD

Annual Return

• Weekly Return: 0.15%
• Annual Return (simple interest): 0.15% × 52 = 8.3%
• USD Profit: 7,727.98 × 8.3% = 602.78 USD
• Total USD After 1 Year: 7,727.98 + 602.78 = 8,330.76 USD

Convert Back to KSh at Year-End

1. If Exchange Rate Remains the Same (129.40 KSh/USD):

• 8,330.76 × 129.40 = 1,078,000 KSh
• Net Return: 1,078,000 − 1,000,000 = +78,000 KSh
• Percentage Return: +7.8%

2. If Kenyan Shilling Appreciates by 10%

• New exchange rate: 129.40 × 0.90 = 116.46 KSh/USD
• 8,330.76 × 116.46 = 970,200 KSh
• Net Return: 970,200 − 1,000,000 = −29,800 KSh
• Percentage Return: −2.98%

3. If Kenyan Shilling Depreciates by 10%

• New exchange rate: 129.40 × 1.10 = 142.34 KSh/USD
• 8,330.76 × 142.34 = 1,185,800 KSh
• Net Return: 1,185,800 − 1,000,000 = +185,800 KSh
• Percentage Return: +18.58%

📊 Summary Table

Why NUBD is best here:
It grows slowly but consistently over time. Good for patient investors looking for reliable growth.

3. Trader (buying and selling quickly based on price moves)

Best bond: GOGR (SPDR Bloomberg SASB Green Bond ETF)

• GOGR had very large swings:
  • Biggest gain in one week was +57.14%
  • Biggest drop in one week was –46.32%

1. Initial Conversion

• Start: 1,000,000 KSh
• Rate in: 129.40 KSh/USD
• USD equivalent: 1,000,000 ÷ 129.40 = 7,727.98 USD

Vertical Axis (Y-axis):

• This is weekly return (%), ranging roughly from -50% to +60%.
• A positive value means the ETF price increased that week; a negative value means it dropped.

Horizontal Axis (X-axis):

• This is simply the week number, from Week 1 (January 2024) to Week 63 (April 2025).
• It shows the return performance in order, not by exact date (though that can be added if needed).

Key Observations:

1. Volatility:
   • The ETF experienced high volatility. Some weeks had extreme gains (e.g., +57.14%, +50.00%), while others had sharp drops (e.g., -46.67%, -40.00%, -37.50%).
     
2. Frequent Swings:
   • The returns oscillate a lot week to week, indicating unstable or speculative price action. This kind of movement suggests either short-term trading activity or sensitivity to external factors like interest rates, ESG news, or macro events.
     
3. No Clear Trend:
   
   • There’s no long-term trend of consistently increasing or decreasing returns—just repeated ups and downs. This could point to a market lacking clear directional conviction about green bonds during this period.
     
4. Opportunity for Traders:
   
   • Such volatility could offer trading opportunities for short-term traders using momentum or mean reversion strategies.
   • For example, big drops (like -33% or -40%) followed by rebounds (+33%, +25%) suggest potential for exploiting overreactions.

Volatility computation

List and convert returns
Convert each of the 63 weekly returns as a decimal:
–0.2000, +0.2500, –0.4000, +0.1667, +0.5714, 0.0000, …, –0.1667, –0.2000.

Calculate the mean return

• Adding all 63 decimal returns together:
  –0.2000 + 0.2500 + –0.4000 + … + –0.2000 = +0.6120
• Dividing by 63 to get the average:
  Mean = 0.6120 ÷ 63 = 0.0097

Find each deviation from the mean
For each return rir_iri​:

• Subtract the mean:   ri–0.0097\;r_i – 0.0097ri​–0.0097
• Square that difference to get (ri–0.0097)2(r_i – 0.0097)^2(ri​–0.0097)2

Examples:

• First return: –0.2000 – 0.0097 = –0.2097 → squared = 0.0440
• Second return: +0.2500 – 0.0097 = +0.2403 → squared = 0.0577

Sum all squared deviations
Add up all 63 squared differences:
0.0440 + 0.0577 + … + (last squared deviation) = 3.0760

Computing the sample variance

• Dividing the total squared deviations by (63 – 1)=62:
  Variance = 3.0760 ÷ 62 = 0.04962

Take the square root to get volatility

• Standard deviation = √0.04962 = 0.2228

Express as a percentage

• Weekly volatility = 0.2228 × 100 = 22.28%

Interpretation

• A variance of 0.04962 means the returns fluctuate around their mean, and the standard deviation is about 22.28%.
• This suggests a moderate to high level of risk/volatility.
• Investors would expect that most of the time, the returns will fall within:
  • ±22.28% (1 SD)

Computing the returns for a Trader in Different Scenarios

Initial Setup

• You have: 1,000,000 KES
  
• Exchange rate: 1 USD = 129.40 KES
  
• Convert to USD:
  → 1,000,000 ÷ 129.40 = 7,727.98 USD

1. Average Annual Return

1. Total Weekly Returns

From the data, we aggregate 63 weekly return percentages.

Total return = +106.87%

2. Average Weekly Return

Dividing by 63 to get the average:

106.87% ÷ 63 = 1.696% average return per week
(That’s about +1.70% per week)

Converting Weekly to Annual Return

Calculating the growth over 52 weeks (1 year):

Formula: (1 + weekly return) ^ 52
→ (1 + 0.0170)^52 ≈ 2.42

The investment would multiply by about 2.42 times in a year.

Average Annual Return (2024 – 2025) ≈ +142%
(Your investment would grow by 142% over one year, on average, if returns follow the same pattern)

Investor Scenario (Average Case Return)

Investor Budget: KES 1,000,000
Exchange Rate: 1 USD = 129.40 KES
Average Annual Return (from the data): +142%

Step 1: Applying Average Annual Return

An average return of +142% means:

$7,727.98 × (1 + 1.42) = $18,717.56

Step 2: Convert Back to KES

$18,717.56 × 129.40 = KES 2,422,483.32

Translation risk (Average return)

2. Best-Case Scenario (return = +50.44%)

• After 1 year:
  → 7,727.98 × 1.5044 = 11,625.97 USD
  
• Convert back to KES:
  → 11,625.97 × 129.40 = 1,504,400 KES
  
• Profit:
  → 1,504,400 – 1,000,000 = +504,400 KES
  

3. Worst-Case Scenario (return = –52.3%)

• After 1 year:
  → 7,727.98 × 0.477 = 3,686.24 USD
  
• Convert back to KES:
  → 3,686.24 × 129.40 = 477,000 KES
  
• Loss:
  → 477,000 – 1,000,000 = –523,000 KES
  

Why GOGR is best here for a Trader:
Huge gains possible if you time it right—but also risky. Best for traders who monitor prices closely.

Summary

Kenyan Green Bonds

NSE

1. Acorn Green Bond (2019)

🔹 Amount: KES 4.3 billion

🔹 Tenor: 5 years (2019–2024)

🔹 Return/Yield: 12.5% fixed annual coupon

Details:

• The bond offered a 12.5% per annum fixed interest, payable semi-annually.
  
• This rate was significantly higher than most government bonds or traditional corporate bonds at the time — a reflection of both the green premium and market risk perception for a first-time issuer.
  
• Interest was tax-exempt, making the effective return even more attractive to investors.
  
• Investors included institutional players such as Stanlib Kenya, Nabo Capital, and Britam Asset Managers.
  

Market Reception:

• Oversubscribed — indicating strong investor appetite.
  
• Listed on the NSE and LSE, which improved liquidity and global visibility.
  
• Investor updates suggest strong occupancy rates in the student residences, helping meet debt service obligations.
  

2. Acorn Green Bond – Second Tranche (2021)

🔹 Amount: KES1.43 billion (Target 1.438bn 146% oversubscription)

🔹 Tenor: Similar to Tranche 1

🔹 Return/Yield: 12.5% fixed annual coupon (same as first tranche)

Details:

• Structurally similar to the first tranche in both yield and payment structure.
  
• This consistency was designed to create a reliable brand around Acorn’s bond products.
  
• Supported by continued investor trust in Acorn’s development model and operational performance.
  

Performance Indicators:

• This second issuance was a tap offer, not a new bond — essentially extending the first bond’s size due to its success.
  
• Strong demand indicated that early investors were satisfied with the risk-return profile.
  
• Also tax-exempt, preserving the effective yield appeal.
  

Summary

​Acorn Holdings Limited’s second green bond, part of its KES 5.7 billion Medium-Term Note (MTN) programme, had a tenure of five years and offered investors an annual fixed return of 12.5%. ​Business Daily

The bond was initially issued in November 2019 and was scheduled to mature on November 8, 2024. However, Acorn opted for early redemption, repaying the outstanding balance of KES 2.7 billion along with accrued interest on October 4, 2024. ​Kenyan Wall Street

The proceeds from this green bond were utilized to finance the development of environmentally sustainable, purpose-built student accommodation (PBSA) projects across Nairobi. These projects collectively provided over 7,000 student beds, including facilities like Qwetu and Qejani Chiromo. ​The Star

The bond was partially guaranteed by GuarantCo, a member of the Private Infrastructure Development Group (PIDG), which provided a 50% guarantee on both principal and interest Capital News

The successful early redemption of the bond underscores Acorn’s financial prudence and the robustness of its underlying portfolio, enabling the company to meet its obligations to investors ahead of schedule. ​Business Daily

Summary Table of Returns

B. Carbon Offsets

KEY

Example in Use:

If you see:

Platform: Pachama
Min Investment: $10
Price per Ton: $15.00
Project Types: Forestry, Reforestation
Regions: South America, North America, Africa
Certifications: VCS, CAR

It means:
You can start offsetting with $10, paying $15 to remove one ton of CO₂, and your money goes toward planting or preserving trees in three continents. The project’s environmental impact is verified by trusted third parties like VCS and CAR.

Analysis and Links for where to buy

Project analysis

1. Cost to Offset 1 ton of CO₂

• Carbonfund: $10 / tCO₂e → cheapest
  
• Terrapass: $12.99 / tCO₂e
  
• Moss.Earth: $16.50 / tCO₂e
  
• Pachama: $15.00 / tCO₂e
  
• Klima DAO: $18.75 / tCO₂e → most expensive
  

Example:
To cancel out 5 tons of CO₂:

• At Carbonfund: 5 × $10 = $50
  
• At Terrapass: 5 × $12.99 = $64.95
  
• At Klima DAO: 5 × $18.75 = $93.75
  

2. Minimum Entry Barrier

• Lowest: Terrapass or Moss.Earth both let you start with just $5.
  
• Mid: Carbonfund and Pachama at $10.
  
• Highest: Klima DAO at $15.
  

Example:
With $20 in your pocket:

• You could buy 1.5 tons at Klima DAO (1.5 × $15 = $22.50, so actually just 1 ton for $18.75),
  
• Or you could get 2 tons at Carbonfund (2 × $10 = $20),
  
• Or nearly 1.5 tons at Terrapass (1.5 × $12.99 ≈ $19.49).
  

3. Project Type Focus

• Broader mix:
  
  • Terrapass and Klima DAO fund Renewable Energy, Forestry, Methane Capture.
    
• Forestry & Reforestation only:
  
  • Pachama specializes in trees—good if you want to back forest projects.
    
• Biodiversity emphasis:
  
  • Moss.Earth adds Biodiversity alongside forestry.
    

Example:
If you care most about preserving rainforests and wildlife, Moss.Earth and Pachama are your top two.

4. Global vs. Regional Reach

• Truly global: Klima DAO (blockchain platform) funds projects anywhere on Earth.
  
• Americas + Africa:
  
  • Carbonfund, Pachama and Moss.Earth cover North & South America; Carbonfund & Pachama also reach Africa.
    
• Americas only: Terrapass sticks to North & South America.
  

Example:
To support an African cookstove project, pick Carbonfund or Pachama—Terrapass can’t help there.

5. Certification Quality

All platforms use recognized standards, but note:

• Gold Standard & VCS (Verified Carbon Standard) are widely viewed as top‑tier.
  
  • Terrapass and Klima DAO both carry Gold Standard + VCS.
    
• American Carbon Registry appears only with Carbonfund.
  
• Climate Action Reserve is unique to Pachama.
  

Example:
If you need Gold Standard credits (often required by corporate ESG policies), your choices are Terrapass or Klima DAO.

Learn more about Carbon Credits at Serrari Ed, your online trusted learning partner.