Green bonds / thematic or esotheric bonds. The possibilities for social or thematic bonds are endless. Around $200Bn of green bonds were issued in 2021.
Aircraft are net polluters making it difficult to issues thematic bonds until viable engine technology meets emissions standards, which are higher than in the CORSIA scheme, in a timely manner.
Nevertheless, investors foresee high returns from aircraft once they offer positive climate “impacts.” After factoring in the pros and cons of green bonds, borrowing will be cheaper, and the bonds will enhance the reputation of airlines, lessors, and banks, as the pool of buyers grows.
Asset Backed Securities.
Asset-backed securities (ABS) finance pools of familiar alternative asset class types, such as aircraft leases, auto loans, credit card receivables, mortgages, and business loans.
Financial institutions pool multiple aircraft loans into a single security, to create asset-backed securities, that are then sold to investors.
These contractual obligations to pay often rank senior to a borrower’s traditional debt obligations, reducing ABS investors’ exposure to the borrower’s financial health, in this case the aircraft lessors. ABS also has many other investor-friendly features that may help protect against loss and improve liquidity, such as tranching of risk, overcollateralization, and diversity of payers in each underlying pool.
Some ABS and other forms of structured credit continue to offer higher yields than similarly rated corporate or municipal bonds.
The principal job of ABS investors is to analyze the cash flows from these obligations, to assess value and the possibility of loss, rather than aircraft investment decisions. cross asset classes, and require multiple approaches to analyzing and comparing them to other alternative assets.
An example would be to compare the value of airline equity yields. It is the ratio of earnings to the equity invested. The ratio can be used because it measures return on an investment's equity portion. Another way to look at the decision is to think in terms of “certainty” and “uncertainty” with respect to price.
Except for a default by the US government, US Treasuries are perceived as having a high level of price certainty because they offer a fixed income stream, without risk of capital loss, if held to maturity. In contrast, equities suffer from price uncertainty. They do not provide fixed cash flows and future prices are unknown. Investment grade credits fall between treasuries and equities because they have an income stream coupled with default risk.
Funds-In-Trust (FIT).World International Property Organization (WIPO), is a self-funding agency of the United Nations, with 193 member states. WIPO has long-term relationships with a number of key donor countries. These donor countries provide Funds-in-Trust (FIT) to finance technical assistance and human capacity building projects to developing countries and countries with economies in transition.