Franklin Templeton Launches Muni Green Bond Fund

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Franklin Templeton has launched the Franklin Municipal Green Bond Fund, one of the few strategies solely focusing on muni green bonds. The fund seeks to maximize income exempt from federal income taxes by investing in green bonds, including climate bonds, sustainability bonds, and environmental impact bonds.

Franklin Municipal Green Bond Fund is managed by San Mateo, California-based portfolio managers Daniel Workman and Nicholas Bucklin of Franklin Templeton’s Municipal Bond team. The portfolio managers leverage the firm’s team of research analysts dedicated to municipal bond analysis to identify authentic green bonds.

Franklin Templeton said 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.

Franklin Municipal Green Bond Fund will invest at least 80% of its net assets in municipal green bonds. The universe of US municipal green bond issuers includes states, cities, municipal water and sewer enterprises, transportation systems, universities, and hospitals, among others. Under normal market conditions, the fund will invest at least 80% of its net assets in municipal securities whose interest is free from regular federal income taxes. The fund also may have up to 100% of its assets in securities that pay interest subject to the federal alternative minimum tax.

The fund’s managers will leverage 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.

Franklin Templeton’s 31-member municipal bond team manages a wide variety of single state and national municipal bond strategies for investors in the US and beyond, via a comprehensive fund lineup and institutional and separately managed accounts (SMAs), which include a green bond SMA.

In June, Verizon announced it is on track to be carbon neutral across scope 1 and scope 2 emissions by 2035 and has issued a $1 billion green bond to invest in innovative solutions to accelerate the company’s sustainability efforts. This includes powering operations with 50% renewable energy by 2025 and new virtual power purchase agreements (VPPA) for more than 380 MW of new wind and solar power capacity.