The Climate Change Support Team for the United Nations Secretary General has described green bonds as “one of the most significant developments in financing of low-carbon, climate resilient investment opportunities.”
In a recent report on private sector participation in climate finance, the Climate Change Support Team has described green bonds as very attractive to institutional investors, as the risk and returns are determined by the financial health of the issuer and not just its clean energy assets.
The report noted that the annual labelled green bonds market has raced from zero in 2009 to $36 billion in 2014. This year, the Team expects the green bond issuance to be between $50 billion and $70 billion. However, a recent report by Moody’s expects the bond issuance to be around $40 billion. The unlabelled market, however, is still bigger with around $130 billion issuance in 2014.
The report mentions several green bonds issues that attracted substantial interest from investors. India’s first labelled green bonds issued by Yes Bank was oversubscribed twice-over, as was KfW’s Australian dollar-denominated green bond. In 2014, Toyota’s green bond for low-carbon vehicles raised $1.75 billion, about twice the initial target. Toyota raised an additional $1.25 billion in 2015.
The report also revealed that China leads all countries in market share for climate-aligned bonds. China accounts for a third of the global market share of climate bonds. However, almost all of them would be non-labelled bonds as the first labelled green bond in China was issued in July this year. Apart from China, other developing countries are also showing considerable interest in the green bonds market. Companies and institutions in India have already issued green bonds and several more are on their way. South Africa, Mexico, and Brazil have already seen, or will imminently see, green bonds issued.
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