Green Bonds were created to fund projects that have positive environmental and/or climate benefits. The majority of the green bonds issued are green “use of proceeds” or asset-linked bonds.
Green Bonds raise funds for new and existing green projects with environmentally sustainable benefits aiming to address key areas of concern such as climate change, natural resources depletion, loss of biodiversity and/or pollution control.
The green bond market took off in 2014 with $36.6bn issued; triple the amount issued in 2013 ($11bn). As of May 31, 2016, labelled-green bond market stands at US$ 118bn outstanding, reaching 155.5 bn in 2017.
The 2018 survey of the green bond market performed by the Climate Bonds Initiative has identified a climate aligned universe of USD1.45 trillions, including fully aligned climate issuers ($497bn), labelled green bonds ($389bn), and strongly-aligned issuers ($314bn). Bonds from fully-aligned US Muni issuers amounted to $250bn.
This Bonds and Climate Change - State of the Market 2018 Report presents the research findings of climate-aligned issuers, conducted between April and June 2018. The report identifies issuers who generate at least 75% of their revenues from ‘green’ business: low carbon transport, clean energy, sustainable water and wastewater management, low carbon buildings and built environment, sustainable forestry and agriculture, as well as waste management and recycling.
According to the Green Bond Market review, performed by SEB, green bond issuance came in at USD 183 billion in 2018, with an increase of 6% compared to 2017.Sources:
Climate Bonds Initiative (2018). Bonds and Climate Change - State of the Market 2018 Report. September 2018.
SEB (2019). Green Bond Market Review and 2019 Outlook. SEB The Green Bond. SEB Climate & Sustainable Finance Review
Supporting National Development Banks (NDBs)
The objective is to support NDBs in their efforts to raise private funds at adequate maturities in both local and international capital markets, through the issuance of green bonds or sustainable bonds. Those issuances should attract national and international institutional and impact investors and therefore have an impact on the issuer’s ability to diversify sources of funding, while promoting low-carbon investments or investments with high positive social impacts.
Those projects will also participate in the development of national capital markets. The Program is currently supporting NDBs in Colombia and Mexico.
Supporting Countries in LAC to Design Efficient Incentivization Strategies for Sustainable Bonds
The IDB is also working with other type of players such as Government Agencies, Financial Sector regulatory bodies or domestic Stock and Bond Exchanges in order to support the design of national strategies to incentivize domestic green and sustainable bonds markets. Pilot projects are currently being developed in Brazil, Mexico and Ecuador.
Both sections of the program include a strong dissemination component and all relevant knowledge products will be made available through this platform.
The program is currently being developed thanks to the support of Switzerland’s State Secretariat for Economic Affairs (SECO) for Colombia, Peru and Ecuador – and of the International Climate Initiative (IKI) of the Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety (BMUB) via the LGI program for other countries in the region.
The IDB is working closely with the Climate Bonds Initiative and several trainings and activities will be carried out within LAC countries throughout 2016-2017. The Climate Bonds Initiative is an international, investor-focused not-for-profit. It is the only organization in the world working solely on mobilizing the $100 trillion bond market for climate change solutions.
Beneficiary Institutions will receive technical and promotional assistance throughout the process
Fully-aligned climate issuers
Strongly-aligned climate issuers
Labelled Green bonds
Climate-Aligned Bond Universe
Development Banks have crucial role as issuers and anchor investors
Source : Climate Bond Initiative
Quick guide to terminology
• Fully-aligned climate issuers: Bond issuers that derive >95% of revenues from climate-aligned assets and green business lines.
• Strongly-aligned climate issuers: Bond issuers where 75%-95% of revenues are derived from climate-aligned assets and green business lines.
• Climate-aligned bond universe: the term is used to describe the full universe of aligned-outstanding bonds - i.e. from fully aligned issuers, strongly-aligned issuers and green bond issuers.