LONDON (Reuters) - Global “green bond” issuance should more than double this year to a record $25 billion as increased information on how the money will be used attracts more investors to the fledgling market, investment bank HSBC said.
Proceeds from green bonds are typically used on projects to cut greenhouse gas emissions, adapt to climate change, increase energy efficiency or expand the use of renewable energy.
“The era of green bonds has arrived. We see increasing use of bond markets to raise capital for the low-carbon economy,” analysts at HSBC’s climate change and fixed income research divisions said in a research note on Monday.
Earlier this month, a group of international banks drew up a set of principles to spell out the criteria for what should qualify as a green bond, including potential types of bonds, the issuance process and the need for firms to detail their plans for the proceeds.
Until recently, the definition of what qualified as a green bond was unclear. The guidelines are voluntary, but they should help give more clarity and increase the integrity of the burgeoning market, HSBC said.
The green bond market has grown by a compound annual rate of 55 percent since it began in 2007. Issuance last year jumped to $11.4 billion, more than triple the 2012 level, according to
“The issuance of green bonds is being driven both by the capital needs of issuers as well as the commitment of institutional investors to climate finance and responsible investment,” HSBC analysts wrote.
Until last year, multilateral development banks such as the European Investment Bank, the International Finance Corporation and the World Bank accounted for most of the issuance of green bonds.
Last year, corporate green bonds raised nearly $10 billion, with about half of that coming in November.
The new Green Bond Principles are being supported by banks including Credit Agricole, Deutsche Bank, Goldman Sachs, Morgan Stanley and Rabobank.
editing by Jane Baird