HONG KONG Jan 19 Green bond issuance worldwide
could cross $200 billion in 2017, doubling the 2016 record, as
it continues to be driven by the Paris climate agreement,
China's clean energy campaign, as well as new issuers and
structures, rating agency Moody's said on Thursday.
Issuance of green bonds - debt instruments used to raise
funds for projects involving renewable energy, energy
efficiency, clean transportation or encouraging a low carbon
economy - rose 120 percent in 2016 to 93.4 billion.
That surge was on the back of Chinese borrowers rushing to
the market. Still, the doubling of volumes will continue in the
current year with the tally seen rising to $206 billion.
"With continued momentum attributable to the Paris climate
agreement and factors such as issuer and geographic expansion,
green bond issuance will likely reach another milestone in
2017," the report said.
The 2015 Paris Agreement, signed by almost 200 nations, aims
to end the fossil fuel era by shifting to renewable energy in
the second half of the century.
New instruments, such as green money-market securities in
the form of short-term commercial paper, or preferred stock,
and a variety of structured as well as securitized transactions,
could also drive this expansion, it said.
The ratings agency said that green bond issuance increased
every year by an annual average of 163 percent between 2011 and
2015 and set consecutive issuance records during 2013-2015.
China-based issuers were the biggest source of these bonds
in 2016 accounting for $32.9 billion - more than a third of the
China needs at least 2 trillion yuan ($308.8 billion) of
green investment annually over the next five years to promote
environmental protection and reduce the effects of pollution
from its rapid industrial growth over the past three decades.
At the same time demand for green bonds is growing, with
many pension funds and money managers in the West mandated to
invest in socially responsible and environmentally friendly
Even at 2016's record issuance of $93.4 billion, green bonds
still represented just 1.4 percent of global capital market debt
issuance in 2016, which reached around $6.7 trillion, according
"While green bonds continue to gain momentum and have been
extremely successful in generating attention for climate change
and climate solutions, green bond-linked funding and investments
continue to fall short of reaching the scale needed to play a
significant role in the transition to a low-carbon economy,"
Moody's said in the report.
Moreover, challenges could emerge in the shape of the
incoming US administration led by Donald Trump, who has called
man-made climate change a hoax and said he would renegotiate the
Moody's said there were barriers to growth.
"The need for a standardized definition and framework,
including with reporting and disclosure practices, remains a
bottleneck in the growth and development of a robust green bond
market," it said.
(Reporting by Umesh Desai; Editing by Eric Meijer)