Green bonds promise steady returns
Emerging frameworks for green bonds could boost finance for renewable energy, REneweconmy By Elena Basic, Mark Robinson and David Fullbrook on 16 April 2015 Green bonds are an emerging class of debt promising investors steady returns without costing the Earth. Since the label appeared a few years ago enthusiasm from nuanced investors worldwide has ensured a warm reception. Next, frameworks and standards now being drafted should deliver credibility for the mainstream and globally connect many more investors to sustainable activities, including renewable energy.
Globally, in 2014 investors snapped up US$36 billion of labelled green bonds, against US$11 billion in 2013, with the Climate Bonds Initiative (CBI), estimating the market could reach US$100 billion in 2015. Inclusion of unlabelled environmental bonds puts the current market at over $500 million estimates CBI. Indeed, if recent trends hold for labelled green bonds then the market could come 2017 top US$1 trillion.
US and Europe have dominated issuance, though momentum is gathering in Australia too. The first green bond in Australian dollars, raising A$300 million, was issued by the World Bank in 2014 to finance climate change mitigation and adaptation. National Australian Bank (NAB) followed initially seeking to raise A$150 million through the bond issue, which subsequently doubled due to A$300 million, for a portfolio of 17 renewable-energy projects in late 2014. NAB went on to help arrange refinancing of the Hallett Hill 2 wind farm in March 2015 with a A$205 million green bond in the US private-placement market.
While the sums pale compared to the $100 trillion global bond market, the trends are promising. Continue reading
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