Green Bond Issuance May Reach $250bn In 2019
Green bond issuance is 41% higher than in 2018 and could reach a record $250bn (€227bn) by the end of this year according to the Climate Bonds Initiative.
The Climate Bonds Initiative said in a blog that monthly issuance volume of green bonds reached $22.8bn in October, taking total issuance since the start of the year to $210.8bn. The investor-focused not-for-profit group said its estimate for annual issuance this year is between $230bn and $250bn.
2019 will be another record year for green finance! According to @ClimateBonds, green bonds issuances for 2019 have just passed the $200 bn milestone and are expected to reach $250 bn by the end of the year #GreenBonds #GreenLoans #GreenFinance pic.twitter.com/RdRdVFMS7n
— Lyxor (@Lyxor) November 6, 2019
Xuan Sheng Ou Yong, green bonds & ESG analyst at BNP Paribas Asset Management, estimated in a blog that this year’s green bond issuance could reach around $200bn.
“If that pace of issuance can be sustained over the coming five years, the global stock of green bonds would total around $1.5 trillion by 2024,” he added. “While such growth would be impressive, compared to the total volume of fixed-income securities worldwide, that amount is still a modest 1.5%.”
However, the analyst warned that more issuance is required to finance the transition to a low-carbon economy. Ou Yong continued that the green bond market needs to ensure that demand is met with solid and verifiable products as there are no common protocols for impact reporting.
“Impact reporting should show the amount of carbon avoided by investing in a specific bond, or another measurable impact such as greater sustainability of the issuer’s business or operations,” he added. “This avoids greenwashing public relations exercises.”
Ou Yong noted that central banks are key as their purchase of green bonds would send a signal to investors of a tightening in primary markets and reduce the cost of capital for companies.
Greening the Financial System: Tilting the playing field – The role of central banks, produced in conjunction with @CSF_SOAS & @WWFEU advocates accelerated action by central banks and prudential regulators to:https://t.co/ivNBBV3UKK#centralbanks #climate #financeandeconomy pic.twitter.com/gbzCoWXBQy
— Climate Bonds (@ClimateBonds) November 10, 2019
“Such an economic incentive would really allow the green bond market to scale up,” he added. “However, no one expects central banks to immediately execute a green asset purchase programme to replace entirely their current programmes of providing establishing sufficient liquidity against foreign currency needs of countries, and quantitative easing.”
Kevin Horan, director, fixed income indices at S&P Dow Jones Indices said on the Indexology Blog that the green bond market is small when compared to the overall fixed income market.
“Issuance continues to increase along with the diversity of issuers,” Horan added. “The existence of the green bond market and the S&P Green Bond Index is a start, but if capital markets are to meet the needs of the environment and reversing the damages of climate change, the scale of investment capital would have to be exponentially larger in order to meet the challenge.”
The Moscow Exchange said in a statement today that it’s Sustainability Sector welcomed its first instrument – a green bond issued by Center-invest Bank. The bond will be used to finance and refinance outstanding loans given to promote energy-saving initiatives, renewable energy sources and green transport.
Anna Kuznetsova, managing director of MOEX’s Securities Market, said in a statement: “More and more investors are incorporating ESG considerations into their decision making, and companies in worldwide in their turn are making greater efforts to attract interest from these investors.”
The new sector consists of green bonds, social bonds and national projects. To be admitted, an issuer must establish the specific purpose of their offering in the prospectus, report bona fide use of the funds on an annual basis, and submit an external review confirming that the bond complies with standards for green or social issuance.
This month Euronext also launched a green bond segment across its six regulated markets. The segment is operated out of Euronext Dublin, the group centre of excellence for debt, funds and exchange-traded funds.
— SSE Initiative (@SSEinitiative) November 5, 2019
Euronext’s green bonds offering went live on 5 November with more than 50 participating issuers, and marked the first product launch of the 2022 strategic plan.
“With more than 44,000 bonds, Euronext is the world’s number one venue for bond listing and has become a global leader in sustainable finance, with approximately €118bn worth of green bonds listed on Euronext markets, €40bn of which was raised in the last 12 months,” said the exchange.
To be eligible, green bonds must be listed on a Euronext market, be aligned with recognizable industry standards such as ICMA Green Bond Principles or the Climate Bond Initiative Taxonomy, and be accompanied by an appropriate external review performed by an independent third party.
631 institutional investors with more than $37tr in assets said action should be more ambitious.
The Green Continuum programme aims to enhance green debt market beyond existing green bonds.
This is part of a broader strategy to take the Eurex ESG offering global.
Focus areas include listings, ESG data, and sustainable bonds.
A key focus will be mobilising private finance to meet goals of the Paris Agreement.