LONDON - January 10, 2018 (Investorideas.com Newswire) Climate Bonds Initiative final analysis of annual green bond issuance for 2017 shows a December 31st tally of USD155.5bn, a new global record, up 78% on the adjusted 2016 figure of USD87.2bn and well over our USD130bn estimate for the year.
Top Ten Rankings
Green Bond Highlights 2017 has the US leading on overall green issuance followed by China and France, the three nations accounting for 56% of the 2017 global total between them. Germany, Spain, Sweden, Netherlands, India, Mexico and Canada filled out the remaining Top10 positions. In the US, the largest overall issuer was Fannie Mae with a staggering USD24.9bn coming from its green Mortgage Backed Securities (MBS) programme - a volume so significant that it shifted the global market.
The largest single green bond placement originated from the Republic of France via its January 2017 EUR7bn (USD7.6bn) issuance, the initial sovereign issue which ended the year at USD10.7bn following two subsequent taps. Despite its overall bond market being much smaller than that of the US or China, France achieved the number three position in large part due to its high-profile sovereign green bond program.
Next largest cumulative bond issuers for the year were China Development Bank (USD4.6bn), the supranational European Investment Bank - EIB (USD4.6bn), and sub-sovereign New York MTA (USD4.2bn).
Global Summary - Key Numbers:
Green Bond Highlights 2017 reports 239 individual issuers came to market in 2017, of which 146 (61%) were debut issuers reflecting a widening of the issuer base each year. Issuers came from 37 countries with 10 new entrants: Switzerland, Argentina, Slovenia, the UAE, Chile, Singapore, Lithuania, Malaysia, Fiji and Nigeria.
- USD155.5bn - total green bond issuance
- Over 1500 green bond issues
- 78% - growth on 2016
- 37 countries from all continents
- 239 different issuers
- 146 new issuers
- USD10.7bn - largest single green bond
- 3 Sovereign Green Bonds: France, Fiji, Nigeria
China and India dominated emerging economy issuance. Additional diversity is coming from new entrants, the sovereign green bonds from Fiji and Nigeria and steady progress in Brazil and across Latin America.
In a signal of the country's increasing commitment to comply with international best practice, issuance from China included Certified Climate Bonds from three giant state backed banks: Industrial and Commercial Bank of China (ICBC), China Development Bank (CDB) & Bank of China (BoC).
Indian issuers more than doubled issuance volume to reach USD4.3bn and break into the 2017 Top10 table. The rise in volume was partly attributed to state-backed entities entering the market and accounting for 47% of issuance. Major domestic Certified Climate Bonds issuance included state backed entities IREDA (USD300m), Power Finance Corporation (USD400m) and Indian Railways Finance Corporation (USD500m).
2017 also saw a consolidation of green finance directions in Brazil which maintained the highest national ratio of agricultural and forestry based green bonds, new issuance from Colombia and Mexico, as well as debut bonds from local government in Argentina and a Chilean corporate.
With the first three Green Sukuk from Tadau Energy (USD58.5m), Quantum Solar (USD236m) and Permodalan Nasional (USD461m), Malaysia has established itself as an innovator in green Islamic finance, in no small part thanks to incentives promulgated by Securities Commission Malaysia such as tax deductions on SRI Sukuk issuance costs.
This approach underscores the power of regulatory measures and incentives to drive issuance growth - observed in Singapore with incentives and China with fast track approval and listing visibility of green bonds.
Use of Proceeds - Clean energy, green buildings, rail and urban metro predominant
Investment in renewable energy continue to be the most common use of proceeds, however their share has dropped considerably from 38% of volume in 2016 to 33% in 2017. Allocations to low carbon buildings and energy efficiency rose 2.4 times year-on-year and accounted for 29% of 2017 use of proceeds, up from 21% in 2016.
With a multitude of rail and urban metro deals, allocations to low carbon transport almost doubled in volume. The trend to finance an increasingly diverse range of projects continues. Waste, Land Use, and Adaptation themes continue to be the smallest, in part due to a lack of clear definitions on which project types would qualify.
2018 Green Bonds Forecast
Climate Bonds initial green bonds forecast for CY 2018 is USD250-300bn. That means a minimum of 60%+ growth on our 2017 figures.
Sean Kidney CEO Climate Bonds Initiative:
"There's now three vital years to reach the M2020 milestone of a trillion dollars in green finance by end 2020. The final results for 2017 provide some foundation, but must be doubled and doubled again by the end of the decade."
"The spotlight is now firmly on financial system actors, banks, insurers, corporates and institutional investors to achieve this vital 2020 climate investment target."
"The results from 2017 also point to the areas for acceleration between now and 2020:
Increasing international alignment and market harmonisation will result in more green investment in China and the greening of the Belt and Road will also gather wider significance.
The Indian market will continue its growth with the government's ambitious renewable energy policies and regulatory reforms providing impetus.
More brown-to-green financing initiatives will emerge from global energy suppliers and the large emitters as institutional investors look for corporate business plans and hence balance sheets to be increasingly geared towards achievement of the Paris targets and the wider clean energy and low carbon transition.
With the world's largest bank in China, ICBC, and other leaders from Europe to Australia issuing green bonds, expectations will grow on all the top 200 banks to commence green lending programs.
Following the initial sovereign issuance from France, Fiji and Nigeria, the door is open for G20 and OECD countries to act on individual sovereign issuance in 2018 and provide stakeholder or supranational support for similar initiatives and market development in emerging economies."
A full copy of the report is available here.
Head of Communications and Media,
Climate Bonds Initiative
+44 (0) 7914 159 838
About the Climate Bonds Initiative:
The Climate Bonds Initiative is an investor-focused not-for-profit, promoting large-scale investment in the low-carbon economy. More information on our website here. How the USD155.5bn 2017 figure is calculated: Only bonds with at least 95% proceeds dedicated to green projects that are aligned with the Climate Bonds taxonomy are included in all figures.
Approximately USD22.5bn in other labelled bonds were issued in 2017 but not included in these figures. A further USD480m is pending inclusion subject to additional information.
USD13.9bn in green bond issuance from Chinese issuers is excluded from our 2017 figures due to lack of alignment between Chinese and international bond standards (2016: USD12.2bn).
We also account for Hong Kong issuers - who issued USD100m in 2017, separately.
Green Bonds Year on Year Growth: Labelled green bond issuance in CY 2016 on adjusted figures reached USD87.2bn, the 2015 figure was USD43.2bn and the CY 2014 figure was USD36.6bn.
We adjusted our official 2016 figure from USD81.6bn to USD87.2bn to account for pending and other issues being included in our database in the course of 2017. USD3.5bn of the amount relates to Fannie Mae Green MBS, now labelled as such.
Climate Bonds previous 2016 Market Highlights report here.
About the 2017 USD130bn issuance forecast:
Climate Bonds forecast of USD130bn was a revision from an original USD150bn and arrived at after assessment of progress in the early months of 2017, particularly influenced by slow growth and very low issuance volumes in China in the first quarter.
More information is in our Policy Highlights from Q1-Q2 2017.
About the USD1tn by 2020 target:
Climate Bonds identified USD1trillion green bonds by 2020 as an objective in our Green Finance Briefing Paper prepared in October 2016 for COP22 Marrakesh.
In April 2017 Christiana Figueres and other climate leaders called for tenfold increase in green bond investment from 2016 levels and setting a green finance milestone for 2020 of USD1trillion as one of the six actions of the M2020 Project.
The call was repeated by global climate leaders in Nature Magazine in June 2017.
It was subsequently included as a forward goal in the Bonds and Climate Change State of the Market 2017 annual flagship report from Climate Bonds Initiative. It was reiterated in our November 2017 COP23 announcement that green bonds issuance for the year had reached USD100bn.
About the M2020 Project:
the M2020 project identifies six critical global climate actions needed by 2020 covering energy, infrastructure, land use, industry and finance with the core objective to bend the emissions curve downwards, keep the Sustainable Development Goals (SDGs) within reach and hold warming at 2 degrees. More information is available here.
Tables and Charts Below
2017 Additional Information, Data, Images, Pages 4-6 below:
Disclaimer: The information contained in this communication does not constitute investment advice in any form and the Climate Bonds Initiative is not an investment adviser. Any reference to a financial organisation or debt instrument or investment product is for information purposes only. Links to external websites are for information purposes only. The Climate Bonds Initiative accepts no responsibility for content on external websites.
The Climate Bonds Initiative is not endorsing, recommending or advising on the financial merits or otherwise of any debt instrument or investment product and no information within this communication should be taken as such, nor should any information in this communication be relied upon in making any investment decision.
Certification under the Climate Bond Standard only reflects the climate attributes of the use of proceeds of a designated debt instrument. It does not reflect the credit worthiness of the designated debt instrument, nor its compliance with national or international laws.
A decision to invest in anything is solely yours. The Climate Bonds Initiative accepts no liability of any kind, for any investment an individual or organisation makes, nor for any investment made by third parties on behalf of an individual or organisation, based in whole or in part on any information contained within this, or any other Climate Bonds Initiative public communication.
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