Investment in green bonds – bonds that fund projects with explicit environmental objectives – has taken off over the past five years and is seen as a powerful vehicle for financing the energy transition and climate policy objectives. While still minuscule compared to debt capital markets at large, according to the Climate Bonds Initiative 2017 saw roughly $155 billion in green bonds issued, compared to $87 billion in 2016 and less than $5 billion just five years prior. The vast majority of green bonds issued support investment in projects directly or indirectly related to energy, including renewable energy, energy-efficient buildings and alternative transport. While the United States remains the biggest single source of issuance, issuers represented a total of 37 countries in 2017, including a number of emerging markets, most notably China and India.
As a young and rapidly growing market, there is still work to be done is making sure that issuance keeps up with investor demand -- and vice versa. There is even standardization yet to be done around the very definition of what makes a bond "green." For governments keen on meeting Paris objectives, there is a role for policymakers to play in creating a regulatory landscape that incentivizes instruments that make capital available for carbon-reducing projects.
The Center on Global Energy Policy hosted a discussion highlighting the perspectives of both the issuer and the investor. Olivia A. Albrecht, Senior Vice President at PIMCO, Christopher Flensborg, Head of Climate and Sustainable Finance at SEB, and Guillaume Pichard, Director, Capital Markets at Ministère des Finances du Québec joined a panel moderated by Katherine Spector, CGEP Research Scholar, to understand where issuers and investors see the biggest challenges and opportunities in green bonds, and how they gauge the metrics for success in this emergent asset class.
This event was open to press. Media inquiries or requests for interviews should be directed to Artealia Gilliard (firstname.lastname@example.org).
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