Building Back Better Sees Unprecedented Growth

Investments and Asset Management
Solar 21
October 19, 2021
Green Bonds: Demand outstrips supply
The first six months of 2021 saw investment in green bonds doubling, with levels set to reach $1 trillion by Dec 2021. Issuers of green bonds are struggling to meet tremendous investor demand, with reports of recently launched green bonds being up to ten times oversubscribed.
Green bonds are specifically designed to support climate or environment related projects and form the backbone of global post-pandemic strategies to “build back better” as policy makers realise a sustainable and environmentally friendly recovery from the pandemic is non-negotiable.  
Growth in green bonds has been most extensive in Europe.  In the world’s largest green bond issuance, the EU issued the first NextGenerationEU green bond and raised €12 billion last week.  The 15-year bond due on 4 February 2037 was more than 11 times oversubscribed, with books exceeding €135 billion. The EU have committed to issue around €250 billion of green bonds between now and 2027 as part of their NextGenerationEU stimulus package, which they see as a unique chance to create a greener, healthier and more digital Europe. 
In July, German energy from waste plant operator and developer EEW successfully placed their €400 million green bond which will serve to refinance sustainable projects stating that the “response was overwhelming”.  Air Liquide has raised €500 million in its first green bond dedicated to refinancing the development of sustainable projects, including biogas, hydrogen, and carbon capture. According to the company, the transaction was significantly oversubscribed by investors.
China and the US are the most active markets with the highest proportion of the green bond market (13.2% and 12.8% respectively); however, Germany and France are not far behind.  This increase is only set to continue as global governments implement more stringent green policies in the post-pandemic recovery, such as Ireland’s Climate Action Plan and Net Zero 2050 in the UK.  
Most large institutions now have a policy to invest according to ESG criteria and this has driven the demand for green and sustainable investment products including Green Bonds. With Goldman Sachs predicting $16 trillion investment in renewables by 2030 and government initiatives to drive global investment in green and sustainable business and infrastructure, the appetite for green bonds is set to endure.

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