The Rise of the Green Bond Market

The Rise of the Green Bond Market

The green bond market is only at its early stages of development but is experiencing steady growth over the last two years with strong activity across the primary market.

$42.2bn of green bonds have been issued in 2015 and green bond issuance is expected to reach $ 80Bn by the end of this year, according to data compiled by the Climate Bonds Initiative (CBI).

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We expect this trend to remain for the next few years, thanks to a 'friendlier' market and regulatory environment - eg, Article 173 in France - along with investors' deepening concern over non-financial risks.

In addition, interest for green bonds is widening as emerging countries are now developing measures to meet their green financing needs. Developed countries convey a great interest to direct savings towards responsible investment.

The steady development of the green bond market is also good news for impact investing. The Green Bonds Principles already provide guidance to measure the environmental impact of green bond investments.

Over the past few quarters, some issuers have significantly improved their reporting by providing measures on environmental benefits such as energy efficiency, renewable energy generation or the avoidance of GHG emissions.

In doing so, a green bond becomes an impact green bond. By bringing these indicators into an investment strategy, investors are empowered to develop impact strategies and optimise financial and environmental benefits.

In addition, green bonds broaden the universe of impact investing, primarily focused on social indicators, into environmental themes through more liquid and more diversified fixed income assets.

Investors are getting more and more worried over global warming and its impact notably on the sustainability of their investments.

Impact green bonds are the strategy of choice ensuring investors that the capital raised is reserved for programs with measurable environmental benefits, climate changemitigation and a high level of transparency.

The asset class is the sweet spot amidst a suitable regulatory environment and favourable technical factors.

Marie-Anne Allier





All, 2016