Global green bond issuance will hit €300bn in 2021, up 50% from this year, driven by sustainable initiatives, legislation and investor demand, according to research from Dutch based NN Investment Partners (NN IP).
By contrast, NN IP said green bond issuance totalled €200bn in 2019 and was on track to be around that this year too.
NN IP pointed to the EU taxonomy – the Union’s system for classifying sustainable economic activities – and the EU Green Bond Standard as key drivers of the green bond market “surge” in 2021, stemming from the EU’s Sustainable Action Plan to finance sustainable economic growth
The EU will start issuing green bonds from the second quarter next year for an estimated amount of €225 bn. This is equivalent to one third of its Covid-19 recovery package
Jovita Razauskaite, green bond portfolio manager at NNIP, said: “These new regulations herald what could be a watershed decade for climate change mitigation, with Europe leading the way via its target to be carbon-neutral by 2050. ESG and green finance are really entering the mainstream.”
She added, “The pandemic has created a positive boost too, as a lot of countries clearly need more funding, and with green ambitions stronger than ever the green bond market will be widely viewed as a major opportunity.”
Separate research from Morningstar showed that notable and certified bond issuance this year included sovereign green bonds issued by Chile and the Netherlands, major Chinese banks, car manufacturer Volkswagen and Japanese fast train network operator JRTT.
It said that overall certified green bonds and loans were issued by over 160 organisations from 36 nations, influencing the green market’s directions toward best practice in both developed and emerging economies.
The US led the way with $32.3 bn of green bonds issued followed by Germany, $21.4 bn and France, $17.8 bn).
Morningstar warned though that investors should be concerned “about the quality of the issues and not invest following catchy marketing campaigns.”
The research provider said that selectivity and transparency are key to ensure that only the most relevant and impactful green projects receive the necessary funding.
It added that this requires “in-depth research and knowledge on green bond issuers, as the market is still at the beginning of its development and investors must be alert to the risks of so-called “greenwashing”, where inappropriate projects receive funding after convincing the public of its environmental good faith.”