Citigroup Inc. (NYSE: C) and Toyota Motors Corp. (NYSE: TM) are said to be making history with the first “green bond” of asset-backed securities in the auto industry. Green bonds are securities or contracts where the proceeds are applied exclusively toward projects and activities that promote climate or other environmental sustainability initiatives. Citigroup and 12 other banks introduced new Green Bond Principles earlier in 2014.

Citigroup’s announcement shows that it has now successfully closed Toyota Financial Services’ (TFS) first ever asset-backed green bond issuance — for a sum of $1.75 billion. The deal was also said to be upsized from a prior $1.25 billion benchmark, due to strong investor demand.

This may not be stock-moving news for Citigroup or Toyota, but this could mark the start of a new trend. As newcomers like Tesla Motors Inc. (NASDAQ: TSLA) begin to take increasingly more share from the likes of Ford Motor Co. (NYSE: F) and General Motors Co. (NYSE: GM), you could start to see more green asset-backed securities issued by the auto finance industry.

Toyota said that it plans to use the net proceeds to acquire retail installment sale contracts and lease contracts to finance new Toyota and Lexus gas-electric hybrid or alternative fuel powertrain vehicles. Citigroup has pioneered green bonds as a new asset class in the asset-backed securities market. The process is said to promote the development of the green bond market and help investors evaluate the environmental impact of bonds.

Again, this will not be immediate market-moving news for the auto companies, nor for the banks that promote the offerings. That being said, this should allow more companies to get better financing mechanisms in place for getting their hybrid, electric and alternative energy cars out to the masses.

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