Our green bond framework
Climate change is one of the most critical issues facing society. As highlighted by the United Nations, its effect is felt worldwide, as it disrupts national economies and impacts people and communities dearly. As a result, immediate action is required if the most catastrophic damages are to be avoided. But while climate change poses a direct risk to businesses, it also presents us with an unprecedented opportunity to take action against it. Green bonds, a recent addition to the global fixed income universe, have emerged as a unique and responsible investment opportunity, which can help tackle climate change. Green bonds enable investors to purchase securities debt earmarked for projects which support a low carbon economy. They help finance a myriad of different initiatives, including among many others, renewable energy, pollution prevention, energy efficiency and biodiversity preservation.
The green bond market’s evolution
Since 2007, the green bond market has rapidly developed, mainly thanks to development banks and subsequently local authorities. In 2013, the market exploded with the emergence of private players such as commercial banks and other corporate entities. In 2016, sovereign issuances appeared, a trend which is expected to grow steadily going forward. Therefore, virtually all types of issuers – sovereign, supranational and agency (SSAs), financials, corporate and sovereigns - have now entered the market. Developing countries and especially China are beginning to take the lead over Europe, and have injected new impetus into the sector. In 2017, global issuance reached USD$155.5bn1, taking the total market size to more than USD$300bn. Notably, the Climate Bonds Initiative (CBI)2 estimates that green bond issuance will reach USD$250 - $300bn in 2018.
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