Global investment in climate change solutions at record high, bond market now worth US$502.6 billion

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21 July 2014

LONDON: Climate bonds are now valued at US$502.6 billion, according to a new report released by the Climate Bonds Initiative in partnership with HSBC.

Drawing on data dating back to January 2005, Bonds and Climate Change: The state of the market in 2014 highlights that the total universe of bonds relating to climate change solutions has grown from US$346 billion in March 2013 to an estimated US$502.6 billion today.

Approximately three quarters of these bonds have implicit or explicit backing from a government body.

"Investors are concerned about climate change. This report shows how they can invest in climate bonds without risk. The investment opportunities we find are safe and secure investment grade bonds, Sean Kidney, CEO of the Climate Bonds Initiative noted.

“This is a Dull Green Market – just how pension funds and insurance funds like it.”

Bonds which are specifically labelled 'green' (see figure below) now amount to US$35.8 billion, an increase of over US $25 billion in just 12 months. Corporate issuance was primarily responsible for green growth in the latter half of 2013, but the trend continued into 2014 with around US$20 billion in bonds issued in the first six months.

CBI graphic

The authors define the broader “climate-themed-bonds-universe” market in relation to seven themes: Transport, Energy, Climate Finance, Buildings & Industry, Agriculture & Forestry, Waste & Pollution Control and Water, and note that although some of these bonds are unlabelled their present categorization could lead to future labelling.

Valued at US$358.4 billion, transport is the dominant sector in the universe which is made up of 1,900 bonds from roughly 280 issuers. Unprecedented growth across all sector occured in 2013, with US$95 billion worth of climate bonds issued - a 12% increase on 2012.

Mark Kenber, CEO of The Climate Group observed: “One of the biggest barriers to making the rapid transition to as low carbon economy is securing large scale investment in tried and tested clean technologies, such as building energy efficiency and LED street lighting. The emergence of a global green bond market can play a central role to overcoming this challenge and the CBI’s new report demonstrates its potential.

“Given that green bonds offer a reliable and steady return, low carbon projects are now extremely attractive for prospective investors. This is a trend which is certain to continue.”

Graphic courtesy of Climate Bonds Initiative and HSBC


By Alana Ryan

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