The Guardian: The market for green bonds has grown 60% this year compared to 2013, surpassing expectations and leading experts to say a niche has now become mainstream.
The climate bonds initiative (CBI) and HSBC said on Thursday that green bonds with a total value of $18.3bn (£10.7bn) were issued in the first half of 2014.
The figure greatly exceed issuance of $11bn in 2013 and have been fuelled by the activity of corporations, investment banks and even local authorities that are now piling into a market previously dominated by multilateral banks and agencies.
So-called green bonds are designed to raise capital for the low-carbon economy, and agreement by banks on a set of “green bond principles” in January has been seen as a major boost to growth.
At the start of the year, HSBC predicted issuance in 2014 could more than double to $25bn – but the latest figures suggest that the total could now hit $40bn. The CBI believes issuance in 2015 could reach $100bn.
Sean Kidney, CBI chief executive, attributes the rapid growth to new rules and transparency about green investment, simpler pricing, and the “ringfencing” of green bonds to ensure investments are dedicated solely to appropriate projects.
He said: “In markets, momentum is everything and right now we have momentum – more and more people are really piling in. They have been sitting on the sidelines waiting to see how it went and now they are saying ‘I should buy this because it just makes sense’.”
Zoe Knight of HSBC added: “This is significant because it demonstrates issuer appetite to support a sustainable future and investor appetite to support this growing segment of the bond market.”
The market for green bonds has until recently been weakly standardised, requiring interpretation about what is and isn’t a climate-related instrument.
The CBI distinguishes between bonds formally labelled as “green”, where proceeds go specifically to environmental or climate-related projects, and a large number of bonds in sectors such as transport and energy that nonetheless have a climate-related impact.
The value of outstanding labelled green bonds – those that have not so far matured – reached $35.8bn in June, but the CBI estimates that total outstanding climate-related bonds could amount to $502bn.
The figure that is turning heads is the growth in private sector issuance by corporations and banks, whose participation in green finance is seen as crucial to addressing climate change, with corporates issuing $10.2bn (55%) so far in 2014 compared with $3bn (27%) last year.
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