Climate-aligned bonds grow 20% to reach $600bn

Over the last decade almost $600 billion (£390bn) worth of climate-related bonds have been issued, with the last year seeing a 20% increase, according to the Climate Bonds Initiative’s new report.

The annual report was commissioned by the HSBC Climate Change Centre of Excellence. Zoe Knight, head of the centre, noted that scaling up finance for the transition to a low-carbon economy is “critical” for addressing climate change.

The total $597.7 billion (£389bn) bonds that have been issued in the last ten years compromise of green bonds, accounting for $65.9 billion (£43bn), and unlabelled climate-aligned bonds. Climate-aligned bonds are identified as issuers with over 95% of their revenues coming from climate-aligned assets.

Within the climate-aligned bond universe transport is the dominant theme, accounting for $418.8 billion (£273) of the investment or 70%, followed by energy at $118.4 billion (£77bn) or 20%. The remaining 10% falls into the building and industry, agriculture and forestry, waste and pollution or water themes, or are multi-sector bonds.

Sean Kidney, CEO of the Climate Bonds Initiative, said, “Investors representing $43 trillion of assets under management signed a statement at last September’s UN climate summit about the importance of addressing climate change and their willingness to invest accordingly, subject to meeting their risk and yield requirements.

“This report shows them that there’s a large and liquid $600 billion universe of bonds they can invest in – and it’s 90% investment grade.”

Some 9% of the climate-aligned bonds universe is from UK issuers amounting to $58.5 billion (£38bn), with notable issuers in the transport sector. Network Rail has issued $44.1 billion (£29bn) of climate-aligned bonds and Transport for London labels its £400 million (£260m) bonds as green in 2015.

The report also includes a ten-point plan for policymakers to take advantage of the growing interest in green bonds to finance their transition to low-carbon and climate resilient economies. Included in the plan is strengthening planning and pipeline transparency of green projects, implementing tax incentives and collaborating internationally.

Photo: images money via Flickr

Further reading:

Investors commit to expanding the climate bond market

Green bond issuance triples in 2014

Green bond market predicted to grow to $100bn in 2015

Deutsch Bank to invest €1bn in green bonds