Green bonds market reached record heights in 2017

The green bonds market grew by a staggering 78% between 2016 and 2017, with national and institutional investors funnelling more than $150bn into low-carbon projects.

The Climate Bonds Initiative (CBI) released its Green Bond Highlights 2017 on Wednesday (10 January), examining the progress that countries are making towards a voluntary 2020 target to mobilise $1trn in collective green finance investment.

The report notes that the green finance market grew from $87.2bn in 2016 to $155.5bn in 2017, a record increase of 78%. The US, led by state-backed initiatives, China and France were listed as the top performers – accounting for 56% of issuance between them.

The UK isn’t listed amongst the top 10 investors, with Germany, Spain, Sweden, Netherlands, India, Mexico and Canada filling out the rest of the top 10 positions.

“With the world’s largest bank in China, ICBC, and other leaders from Europe to Australia issuing green bonds, expectations will grow on all the top 200 banks to commence green lending programs, CBI’s Sean Kidney said. “The spotlight is now firmly on financial system actors, banks, insurers, corporates and institutional investors to achieve this vital 2020 climate investment target.”

Investment into renewable energy was the most common use of funds, although it’s share has dropped from 38% in 2016 to 33% a year later. Subsequently, finance set aside for low-carbon buildings and energy efficiency increased 2.4 times year-on-year, accounting for 29% of total proceeds in 2017.

The allocation of funds for transport almost doubled in volume last year, while waste, land use and adaption themes claimed the smallest percentage of funds. CBI claim this is due to a “lack of clear definitions” on what projects qualify for finance.

Mission 2020

To date, the largest single green bond has been placed by France, through the country’s £7.6bn issuance.

Despite the marked improvement, nations still have a long way to meeting the goals of Mission 2020, the campaign launched by former UN climate chief Christiana Figueres to accelerate decarbonisation efforts. One of the major goals of Mission 2020 is to mobilise $1trn in finance for low-carbon solutions.

Green finance is expected to grow considerably in the coming years, as banks begin to adopt the disclosure recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

Matt Mace

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