The first six months of 2017 have seen a considerable rise in activity for sovereign green bonds, signifying that environmental finance is now firmly in the mainstream.
OPEN has recognised this growth potential since our inception, and is proud to have released the OPEN Cleantech Bond earlier this year, listed on the Irish Stock Exchange.
Non-profit organisation Climate Bonds Initiative (CBI) has released a report summarising green bond-related activity over the first half of the year, which has pointed to the rise of sovereign bonds.
CBI had already correctly predicted in its end of year report for 2016 that this would be the year of the sovereign bond. The French and Polish governments, for example, have both issued their first green bonds and Nigeria is expected to do so later this year.
Beyond sovereigns, Canada, Australia and Argentina have shown impressive green bond activity at state and provincial levels, while in Abu Dhabi the National Bank was the first in the Gulf region to issue such bonds.
The authorities in a range of countries, including China, India, Japan, Luxembourg, Taiwan, South Africa, Nigeria and Indonesia are making moves to set guidelines in place, thus ensuring their domestic green bond issuances keep to international best practice standards.
At the same time, central banks across the world are offering more support to issuers. Singapore’s Monetary Authority, for example, has launched a Green Bond Grant Scheme to help with external review costs, while the People’s Bank of China is considering allowing green bonds within its collateral framework. This, the CBI reports, is particularly important as central banks play a vital role in financial stability and balancing of climate change-associated risks.
As investors become ever more environmentally friendly and responsible, green bonds are becoming increasingly popular. As well as sovereign bonds, private sector green bonds like the OPEN Cleantech Bond have now become mainstream options rather than niche investment opportunities.
More than US$53 billion of green bonds have been issued this year to date, according to CBI, and this, the group predicts, will increase to around US$130 billion by the end of the year. Global climate leaders have pinpointed a sharp increase in green bonds by 2020 to about US$1 trillion-worth as one of six urgent climate action milestones.
Even in the US, where there was concern following President Trump’s decision to withdraw from the Paris Accord, state, city and corporate level key players have pledged to continue working towards climate goals. California in particular is showing impressive growth in domestic climate finance and green bond markets.
Green bonds have not only arrived, they are here to stay.