Green bond investment forecasted to double in 2014

Green bond issuance should more than double this year to a global record of $25 billion (£15 billion), according to investment bank HSBC.

The proceeds from green bonds usually fund environmentally friendly, sustainable projects, such as renewable energy developments or efforts to reduce greenhouse gas emissions or adapt to climate change.

Issuance has been lead by institutions such as the World Bank, the International Finance Corporation and the European Investment Bank but has begun to spread.

According to figures from the Climate Bonds Initiative, the expanding market broke records in 2013 with $10 billion (£6 billion) of green bonds issued. HSBC predict that this rise will continue to gather pace in 2014.

“The era of green bonds has arrived,” analysts at HSBC’s climate change and fixed income research divisions said in a research note, seen by the news agency Reuters, on Monday.

“The issuance of green bonds is being driven both by the capital needs of issuers as well as the commitment of institutional investors to climate finance and responsible investment.”

Earlier this month, a group of leading banks including Bank of America, Citigroup and JPMorgan Chase set out the Green Bond Principles, voluntary guidelines that define exactly what qualifies as a green bond and set standards for the fledgling market.

“Increasing the amount of capital targeted to address pressing environmental challenges such as climate change is critical”, Marilyn Ceci, managing director of the Corporate & Investment Bank at JP Morgan Chase said of the new principles.

“By providing transparency and integrity to the green bond market and bolstering investor confidence, we expect the Green Bond Principles will expand capital allocation to projects that provide environmental benefits.”

Last week, World Bank president Jim Yong Kim called for the use of green bonds to “expand the universe of investors who are investing in green assets”, and urged institutional investors to “commit to purchasing specific significant amounts of green bonds for their portfolios.”

“Corporate leaders should not wait to act until market signals are right and national investment policies are in place”, he added.

“Be the first mover. Use smart due diligence. Rethink what fiduciary responsibility means, in this changing world. It’s simple self-interest.”

Further reading:

‘This is the year to fight climate change’, World Bank president tells finance world at Davos

HSBC predicts ‘new climate agenda’ in 2014

US firm launches $100m green bonds for low-carbon investment

Working group to provide investors with new standard for low-carbon transport bonds