Two separate reports have this week confirmed the global green bond market is set for a fresh record this year, with issuances topping $200bn.
The Climate Bonds Initiative (CBI) published an update this week detailing how green bond and loan issuance for 2019 has just passed $200bn, marking an all-time high for the market and setting the stage for annual issuance reaching between $230 and $250bn by year end.
According to the CBI’s ranking, the US market leads the way to date in 2019 followed by France, China, Germany, Netherlands, Sweden, Spain, Japan, Italy and Canada.
The three largest green bonds/loans issued in 2019 have come in the form of a €5.99bn issuance from the Dutch State Treasury Agency, a €3bn issuance from KfW, and $2.91bn from Industrial Bank Co., Ltd.
The CBI is forecasting the rapid growth seen across the market will continue into 2020, with projections suggesting issuances should reach between $350 and $400bn next year.
“The climate challenge for global finance – regulators, banks, insurers and institutional investors – remains. Generating that first $1tr in annual green investment by 2021/22 is now critical. It’s the benchmark from which to measure year on year growth in climate based investment towards 2030.”
“Based on these figures, 2019 will be another record year for green finance,” said Sean Kidney, CEO at the CBI. “New sovereigns are entering the market and pioneers like France, Poland and Nigeria are now repeat green issuers. Bond size and diversity of issuers is increasing, and noteworthy is the presence of leading European and Chinese banks amongst the largest issuers. All positive signs of market maturation.”
However, he added that even next year’s projected growth was “not enough to address the climate emergency and provide the capital at the scale urgently required for large scale transition, adaptation and resilience”.
“From here on, every year in the 2020s must be a record year for green finance,” he argued. “The climate challenge for global finance – regulators, banks, insurers and institutional investors – remains. Generating that first $1tr in annual green investment by 2021/22 is now critical. It’s the benchmark from which to measure year on year growth in climate based investment towards 2030.”
The update comes just days after Nordic bank SEB issued a similar update, calculating that total green bond issuances by 15 October reached $189.5bn, outstripping the 2018 total of $183bn,
The latest report from the bank also shows that the total volume of issuances for the third quarter of the year reached $59bn, almost doubling last year’s total of $30.1bn.
“This was in part due to better diversification of issuances in terms of countries and sectors, such as government agencies and ABS/MBS, which has compensated for the European (including Nordic) corporate and financial markets that are typically less active during the summer months,” explained Christopher Flensborg, head of climate and sustainable financial solutions at SEB.
Europe, excluding the Nordics, continued to be the most active region, according to the report, with issuances of $9.4bn in September.
Meanwhile, Asia continued its recent strong performance with total issuances of $8bn, with $6.3bn of that total resulting from financial sector issuances across China and Japan.
The Nordics issued $1.8bn of green bonds in September 2019 and in Sweden green bonds accounted for 21 per cent of all financial issuances in the year up to 15 October.
The performance of the green bond market through 2019 fulfils SEB’s predictions at the end of last year, when it forecast “bright growth prospects” which would lift the market to $210bn in 2019, with the potential to “surprise to the upside” and reach $240bn.
The latest results mean this high-end estimate remains “within reach”, Flensborg said.
This article originally appeared in Business Green on 24 October 2019.