Climate Bonds Initiative now hopes annual green bond issuance can reach $1tr by the early 2020s
The global issuance of green bonds has hit yet another milestone for the first time surpassing $100bn inside six months, the Climate Bonds Initiative confirmed yesterday.
The $100bn mark was first reached in November 2017 during the COP23 climate summit, and then again in September 2018. Now the milestone has been reached during the first half of the year for the first time.
The record means the global green bond market has quadrupled since 2014.
Thanks to several bonds settled late last week and a €300m bond from Dutch utility firm Alliander NV settled on Monday, green issuance has now shot up to €106.7bn for 2019 so far, the Climate Bonds Initiative explained.
The milestone sits within bullish forecasts for the green bonds market in 2019. Total issuance projection for the whole of 2019 range from S&P Global Ratings' $180bn, up to the $240bn forecasted by Swedish bank SEB.
The Climate Bonds Initiative itself has previously said issuance could reach as high as $250bn by the end of the year, and it expects the EU's Technical Expert Group on sustainable finance (TEG), which has made a raft of recommendations to help unlock green financing in Europe, to help push issuance even further in future.
Sean Kidney, Climate Bonds Initiative CEO, welcomed the latest milestone, and argued EU regulations on green taxonomy as suggested by the TEG could play a key role in the world achieving $1tr of annual issuance by the early 2020s. The TEG's recommendations could help direct much needed finance towards climate mitigation, resilience, and adaptation, he argued.
"The common definitions that the EU Taxonomy provide across broad sectors of the real economy, opens the door to brown-to-green transition of corporate assets and capex programs, and for banks and insurance companies to sizeably increase the availability of green capital," Kidney explained. "It also provides pension funds with the increasing confidence of their role as long term supporters of the leaders in this economy wide shift towards zero carbon."
The three largest corporate bonds issued to date in 2019 have been a $1.7bn bond from Engie, LG Chem's $1.6bn issuance, and the Industrial and Commercial Bank of China (ICBC) $1.5bn bond, the Climate Bonds Initiative said. The largest sovereign green bond issued in 2019 to date, meanwhile, came just last week from the Netherlands, which delivered a $6.7bn issuance.
"Over the next few years, we would expect to see European nations cement their place in the top 15 of global green bond issuers as the combination of the TEG outcomes, TCFD [Taskforce on Climate-related Financial Disclosures] compliance and institutional investor expectations collectively influence transition-based investment and capital allocation decisions," Kidney added.
Questions remain over whether the TEG recommendations will be adopted and how effective they will prove in normalising green investments across the financial world, while there are also concerns about the extent to which listed firms are embracing the TCFD guidelines and adequately reporting on the climate risks they face. Meanwhile, global green investment is continuing to lag behind the levels required to deliver on the Paris Agreement and the UN Sustainable Development Goals (SDGs).
But as the Climate Bonds Initiative's latest update proves the sector is enjoying rapid growth again after a slightly disappointing few years and with more sovereign and corporate green bonds in the pipeline there are good reasons to think the market could explode over the coming decade.
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