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by the Climate Bonds Team
Another successful year for the green bond market with 2015 issuance
hitting $41.8bn making it the biggest year ever for green bonds.
Achieving scale hasn’t been the only reason to celebrate the green
bond market at the year-end; the real success is the geographical
spread of green bonds across the world. Green bond markets are
popping up all across the world, in Brazil, China, Estonia, Mexico
and India… just to name a few!
Green bond market momentum continues to build after a successful
COP in Paris.
Now we did push hard in 2015 to get $100bn issuance of green bonds
out over the year; although the market has not yet hit our ambitious
target, there is no doubt that green “shoots” of green bond markets
are spreading far and wide. This was ever present at the Paris COP
in December 2015 where green bonds were highlighted as a key tool in
many of the Climate Finance side-events.
Check out our COP
blog for more details.
2015 saw a wider range of issuers and types of green projects or
Similar to 2014, the entry of more corporates, banks, and
municipalities into the green bond market bolstered growth in
2015. There was also a widening of the type of projects
financed by green bonds with more proceeds leveraged for other green
sectors outside of the renewable energy space, in particular low
carbon transport and sustainable water.
Policy support is catalysing green bonds, especially in emerging
markets as India and China start rolling out green development
plans and green finance policies to support them.
Building up to and post COP21, strong political commitment to grow
local green bond markets has driven the global green bond market
towards increasing involvement in emerging markets. In 2015, China
and India have both had inaugural green bond issuances, and
considered policy support. China published official green bond
guidelines in December, and India have also started developing
India led with an inaugural green bond from Yes Bank, (INR 1000
crore, AA+, 10 yrs), followed by Export-Import Bank of India ($500m,
BBB-, 5 yrs); CLP Wind Farms (INR 6bn, AA, 3-5yr), and lastly IDBI
($350m, BBB-, 5 yrs).
China wasn’t far behind with its first corporate green bond (issued
offshore in Hong Kong) from Goldwind ($300m, 3 yrs). Agricultural
Bank of China then issued the first finance sector green bond in
three tranches RMB600m, $400m, and $500m (A, 2-5 yrs).
Greater disclosure on green project selection, proceeds
management and environmental impacts shows increased transparency
in green bonds. The US green bond market has been relatively
slow to adopt the independent review model prevalent in other green
bond markets (with the exception of DC Water, which got a Vigeo
second review). Instead US issuers tend to use proxies such a green
building certification to identify green projects, for example
leveraging LEED to
identify low carbon buildings.
However, this year there was a small shift towards the independent
review model Europe uses, with Morgan Stanley providing a review for
its inaugural green bond ($500m, BBB+), followed by Renovate America
($201.5m, AA) and U.S. municipal bonds (Central Puget Sound Transit
($942.8m, AAA, 3-35 yrs); DC Water ($100m, AA, 3-12 yrs)). We expect
this trend to continue in 2016.
A growing number of green bonds are aligned with or certified
against the Climate Bond Standard. Certified green bonds have
been issued by Mexico’s Nacional
Financiera ($500m, BBB, 5 yrs); ABN AMRO (€500m, A, 5 yrs);
ANZ (AUD600m, AA-, 5 yrs) and NAB ($300m, AA-, 7 yrs); and a number
of smaller retail bonds from BELECTRIC in the UK. Certification
provides assurance that proceeds are used for assets aligned with a
low carbon and climate resilient economy.
Investor interest in green bond outstrips the supply
Growing investor demand, particularly by institutional investors and
corporate treasuries, continues to result in over subscriptions as
well as pledges to invest billions more capital into green bonds.
Further to these commitments, specific green bond mandates or funds
are being managed by AXA, SEB Investment Management, State Street,
BlackRock, Calvert Investments, Nikko Asset Management and Shelton
In December 2015, at the Paris COP, asset owners, investment
managers and individual funds managing $11.2trn of assets signed a statement
in support of the green bond market.
The rising tide of reporting on green bonds
Importance of reporting
Reporting is key to validating the green credentials of the bonds.
Investors need to know what their green bond holdings are financing.
The Climate Bonds Initiative will dive further into reporting on
trends and market states in 2016.
There has been increasing interests and efforts in green bond
We have seen higher quality reporting (e.g. EIB Climate Awareness
Bonds broke down proceeds allocation by bonds and projects). There
have also been strong trends in establishing outcome KPIs,
disclosing reporting framework, and committing to third-party
assurance on reporting.
Majority of issued green bonds provide annual reports
Half of outstanding green bonds were issued more than a year ago
therefore should have reported. The majority of them have disclosed
their annual reports. Over 90% of the reports disclosed proceeds
allocation and climate impacts of projects or assets financed.
Growing awareness in the market
In addition to the update of the Green Bond Principles wording on
reporting, several development banks jointly drafted a framework on
Green Bond impact reporting harmonization.
Looking towards 2016, we anticipate that the green bond
market will diversify in financial products, with potentially the
first sovereign green bond and green sukuk in the pipeline.
Certified bonds are also expected to grow in the coming year, along
with more forestry bonds.
Read the full 2015 year end report here.
Notes on the figures:
- Currency exchange rates are taken from the last price on the
date of issuance
- Some issuances fall on the cusp of the year in which case we
use the announcement date as recorded on Bloomberg to determine
- Additional taps of bonds are included dependent on tap
- $41.8bn is the labelled green bond total – this means that the
issuer has self-labelled the bond as green in a public statement
or bond document.
——— The Climate Bonds Team
includes Sean Kidney, Tess Olsen-Rong, Beate Sonerud, and Justine
The Climate Bonds
Initiative is an “investor-focused” not-for-profit promoting
long-term debt models to fund a rapid, global transition to a
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