Green Bonds: Demand outstrips supply

Investments and Asset Management
Solar 21
September 8, 2021
Green Bonds: Demand outstrips supply

The first six months of 2021 saw investment in green bonds doubling, and are expected to reach $550 billion by year end. 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.  

Around the world, growth in green bonds has been most extensive in Europe.  The EU have committed to issue around $297 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.  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.  

In July, German energy from waste plant operator and developer EEW successfully placed their €400 million green bond which will serve to(re)finance sustainable projects stating that the “response was overwhelming”.  Air Liquide has raised €500 million in its first green bond dedicated to (re)financing the development of sustainable projects, including biogas, hydrogen, and carbon capture. According to the company, the transaction was significantly over subscribed by investors.

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