Green Bond Issuance Surpasses $100bn
Green bond volumes have broken through $100bn (€85bn) more quickly than in 2017 as a global partnership to accelerate issuance was launched last week.
The Climate Bonds Initiative said in a blog that the $100bn annual benchmark was broken last year for the first time and took place in November. Green bond issuance has grown from just $3.4bn in 2012 to $161bn last year.
The European Investment Bank’s first sustainability awareness bond took global volumes from $99.9bn to $100.5bn this year according to the Climate Bonds Initiative. The EIB bond raised $500m when it closed on 13 September.
Climate Bonds latest Market Blog: #Greenbonds issuance passes USD100bn mark for 2018: New Issuers: State of the Market 2018 preview: Green Bond Pledge: #GCAS2018: lots of green gossip and more! https://t.co/Iflu11dwpG pic.twitter.com/IgIjbxmECb
— Climate Bonds (@ClimateBonds) September 21, 2018
Werner Hoyer, president of the European Investment Bank, said in a statement: “Sustainability Awareness Bonds build on the global success of green bonds, ensuring the confidence of socially responsible investors through rigorous transparency and market standards. We have selected the water sector as a starting point, as it is a mature sector, with well-defined impact indicators.”
The EIB said the sustainability awareness bonds build on its €23bn ($27bn) issuance of climate awareness bonds, which began in 2007. The new bonds attracted more than €1.1bn of investor interest with 45 accounts participating in the final book including Candriam Investors Group, Danske Bank Asset Management, PGGM and Union Investment.
Wilfried Bolt, senior investment manager fixed income atDutch asset manager, said in a statement: “The water theme aligns fully with one of the four investable focus areas, in which PGGM together with its institutional clients has the ambition to make a difference.”
Antonio Keglevich, head of sustainability bond origination at UniCredit, said in a statement: “The EIB always tilts towards greater objectives, this time as defined by both the European Commission’s Action Plan on Sustainable Finance and the United Nations’ Sustainable Development Goals.”
The United Nations has estimated that $6 trillion of new annual investment is needed to meet its Sustainable Development Goals. In order to meet these goals, the Global Green Bond Partnership was launched last week to support cities, states, and regions, corporations and private companies, and financial institutions to accelerate the issuance of green bonds.
Founding members include the World Bank, Amundi, European Investment Bank, Climate Bonds Initiative, ICLEI – Local Governments for Sustainability, Global Covenant of Mayors for Climate & Energy and the Low Emissions Development Strategies Global Partnership.
Transformative investments are necessary to accelerate #ClimateAction and achieve the goals of the #ParisAgreement. The launch of the Investor Agenda at the Global Climate Action Summit #GCAS2018 shows that investors are scaling-up financial flows for a more sustainable economy. pic.twitter.com/bbxoX1ddXg
— UN Climate Change (@UNFCCC) September 17, 2018
Vikram Widge, global head, climate finance and policy at the International Finance Corporation, part of the World Bank Group, said in a statement: “In the past decade green bonds have proven to be a real force in driving commercial financing into climate-smart investments and hold great promise for further scale up. IFC looks forward to participating in the Global Green Bond Partnership and collaborating with other pioneers to accelerate the issuance of green bonds and crowd in additional climate finance.”
The partnership will coordinate with efforts such as IFC’s Green Cornerstone Bond Fund Support Program to compliment the Amundi Planet Emerging Green One Fund and other targeted efforts to support the overall growth of the green bond market.
S&P Global Ratings said in a report this month that the green bond market has grown rapidly over the past five years with a compound annual growth rate of 85%. The report added: “We expect the market to continue to accelerate, reaching $200bn in new issuance in 2018.”
The ratings agency said the growth in green bonds was part of the increase in investor interest in environmental, social and governance investment strategies in fixed-income.
Corinne Bendersky, credit analyst at S&P Global Ratings, said in the report: “Environmental, social, and governance, long considered a niche consideration in equity investing, has made major inroads on the mainstream fixed-income market.”
ESG-related risk factors such as climate change and resource scarcity, workplace productivity and product safety, and changing consumer preferences can also have real credit implications.
“Institutional investors such as pension funds and insurers are particularly interested in ESG because it captures long-term and existential risks,” added Bendersky.
She expects ESG demand to continue to grow as millennials place greater emphasis on integrating these values into their investment choices and they will make up three quarters of the workforce by 2025.
Several common themes present opportunities for emerging market exchange operators and stakeholders.
Mid-sized asset managers will also look to mergers to increase scale.
China is the second-largest green bond market globally with £37bn issuance in 2017.
Assets under management have more than doubled since 2012.
Buy-side traders look to actionable, dynamic intelligence to reduce slippage.