July 27, 2017 (LBO) – Issuance of ‘green bonds’ could nearly double to 150 billion dollars this year, according to an article by Mainstreet Partners published by the World Economic Forum.
These environmental bonds are fixed income instruments whose proceeds are predominantly allocated to financing renewable energy, pollution prevention and conservation, among other things.
Launched by multilateral institutions such as the World Bank and EIB, the green bond market has proliferated — in the first half of 2017, around $55 billion of labelled green notes were issued, an increase of 38% year-on-year from the $40 billion issued in the first six months of 2016.
“These bonds represent an opportunity to actively manage the environmental footprint of investors’ portfolios, as two of the main characteristics of green bonds are transparency and reporting,” the article said.
The bonds are also accountable financial instruments, as more than 100 issuers, investors and underwriters have signed the ‘Green Bond Principles,’ a broad guideline that provides definitions and standards for these fixed income instruments.
Investors and underwriters, such as Bank of America Merrill Lynch, Credit Agricole and HSBC, have seen a growth of issuers and issues, while sovereign states like Poland and France have hit the market with their first sovereign green bonds, principally for renewable energy and sustainable infrastructure projects.
Several large corporations have issued green bonds in the past 12 months, including Apple, Iberdrola, Intesa SanPaolo, QBE Insurance Group and TenneT. Chinese and Indian players too have joined the bandwagon, the article said.
As green bonds have a high degree of transparency, investors can quantify the benefits of investing in them using accessible metrics (reduced CO2, for instance, or gigawatt hours (GWh) of clean energy produced).