The prospects of spectacular growth in the global green bonds market has attracted more and larger investors.
The latest large investment house to join the green bonds crusade is BlackRock. The world’s largest investor has partnered with the Climate Bonds Initiative to support the development the global green bonds market.
BlackRock joins the likes of Barclays, Citi Group, and HSBC to partner with the Climate Bonds Initiative. BlackRock manages $4.5 trillion in assets globally. According to the Climate Bonds Initiative, the Bank of America Merrill Lynch has been the largest underwriter for labelled green bonds in the first three quarters of this year, followed by JP Morgan and the Citi Group.
The overall climate or low-carbon bonds market is valued at around $600 billion bulk of which includes bonds aimed at environmentally sustainable investment assets that are not necessarily renewable energy or energy efficiency projects. These are generally referred to as non-labelled green bonds. Some of them would be used for transportation projects like rail which offset consumption of fossil fuels and green gas emissions.
The labelled green bonds market is much smaller. The Climate Bonds Initiative has tracked issuance of around $32 billion of green bonds till the end of October this year. Total issuance this year is expected to be $40-50 billion.
A recent UN report on private sector participation in climate finance 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 recent surge in green bonds issuance in developing countries like India and China have attracted global investment giants to enter this, yet nascent, market of green bonds.
Last month, the Allianz Group also joined hands with the Climate Bonds Initiative.
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