Climate bonds market up 20% to $600bn

The climate bonds market in 2015 is up 20 per cent on last year and has reached nearly US$600 billion, according to a report from HSBC and the Climate Bonds Initiative.

The Bonds and Climate Change: The State of the Market in 2015 shows the total value of climate bonds over the year was US$597 billion, with green bonds rising in value to US$65.9 billion as of June 2014.

Issuances of green bonds tripled in 2014 to $36.6 billion compared to the previous year and is expected to reach $70 billion for 2015, with the potential to climb as high as $100 billion.

Managing Director and head of the HSBC Climate Change Centre of Excellence Zoe Knight said: “Scaling up finance for the transition to a low-carbon economy is critical for addressing climate change…This report from HSBC and the Climate Bonds Initiative provides investors with an important insight into how to access climate related themes through the fixed income market.”

Sean Kidney, CBI chief executive, said investors representing about $43 trillion in assets had signed a statement at a key United Nations Climate Summit last year on the importance of tackling climate change.

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

Climate related bonds were grouped into six climate themes: Transport, Energy, Buildings and Industry, Agriculture and Forestry, Waste and Pollution, and Water.

Most climate bonds were for low carbon transport which accounted for $418.8 billion (70 per cent), with clean energy at $118.4 billion (20 per cent).

South Korean multinational electronics company LG Electronics remained the largest issuer of bonds in the sector, with nearly all of its product range certified with the Energy Star label.

2015 also saw the launch of the Climate Bonds standard for low carbon buildings, with ANZ Bank the first to issue a green bond ($500 million) certified under the property standard in late May, with Brookfield Place in Perth part of the portfolio.

The report also found that green bonds have started to grow in developing markets including China and India.

Chinese bonds accounted for nearly a third of the $600 billion total, due to Chinese rail and hydro bonds.

India’s first corporate green bond came from Yes Bank in February, providing $161 million to finance clean energy projects, which was followed by a $500 million green bond by the Export Import Bank of India for renewables and transport projects.

The first Brazilian green bond was issued in June 2015 by food producer BRF and the €500m corporate issue was successfully placed in the European market.

Mexico is also due to join the green bonds market and is planning a $105 million deal to be backed by energy efficiency loans to small-medium enterprises, with partial guarantees from the Inter-American Development Bank.