The top green bonds stories: Climate Bonds best reads from a busy June & July: Australia, China, Mexico & more! FT, Forbes, El Economista, Bloomberg, Reuters, FTSE Global Markets, Barron’s, the story list keeps growing

This northern summer, we’ve seen a whopping $3bn green bond from the Bank of China, the world’s first government based certified green bond from Australia, plus some great stories out of Latin America, India and Hong Kong.

 

Our top two picks are this sharp feature from UK based business writer and observer Dina Medland and this snapshot into Australia’s brave new world of government green bonds from Rod Myers at The New Daily. 

 

The State of Victoria Green Bond

The State of Victoria‘s green bond was the big news of July. It is world’s first government green bond certified under the Climate Bonds Standard. More here.

 

Reuters, Victoria adds to Aussie bond market's green shoots, John Weavers

Australia's underdeveloped Green bond market is about to grow as the Treasury Corporation of Victoria lays the groundwork for the first such issuance from a state government.

 

ABC News, Green bonds issued to finance Victorian environmental projects

Green bonds worth $300 million that will fund environmentally-friendly projects in Victoria have been issued by the State Government, in what the Treasurer says is an Australian-first.

 

Australian Financial Review, Victoria makes Green bond history, Lucille Keen

The triple-A rated bonds, issued by the Treasury Corporation of Victoria, were the first state or federal government-issued bonds anywhere in the world to receive international Climate Bond Certification.

 

The New Daily, New green option for super funds, Rod Myer

The move is the first by an Australian state into the green bond market and the first government green bond to win certification from the international Climate Bonds Initiative, an investor focused not-for-profit group that supports low carbon investment.

 

The Fifth Estate,  Victoria issues government-first green bond, Cameron Jewell

Victorian Treasurer Tim Pallas said the government was proud to lead the country on government-issued green bonds, and said there was a growing appetite for socially responsible investment.

 

PV Tech, Australia’s Victoria raises AU$300 million through world first Green Bond issuance, Tom Kenning

Climate Bonds Initiative chief executive Sean Kidney said: “The Victorian Government has now positioned itself as a national and international leader with the issuing of this first certified green bond through TCV.”

 

Australian Financial Review, Victoria adds to bond market's green shoots

With total green offerings of just $2.35 billion ($US1.76 billion) from six credits, the Australian dollar market accounts for just 1.5 percent of all outstanding green bonds, according to the Climate Bonds Initiative's fifth annual state-of-the-market report.

 

ProBono Australia, Victoria Issues Green Bonds to Fund Enviro Projects

“The London-based Climate Bonds Initiative certified the bond under its Climate Bond Standard & Certification Scheme, to ensure green bond proceeds are used in ways consistent with delivering a low-carbon economy,” said Victorian Treasurer Tim Pallas.

 

IFR Asia, Victoria to roadshow Green issue

 

2016 Bonds and Climate Change Report

Our 5th annual ‘Bonds and Climate Change:  State of the Market in 2016’ (SOtM) report was launched on London, followed by a roadshow from Australia to Brazil. See some of the media reports below.

 

Bloomberg, Green Investments at $694 Billion Are Much Bigger Than You Think, Jessica Shankleman

The green bond market is much bigger than most people think, and it’s booming on a scale not appreciated beyond the tight circle of analysts who track it.

 

Forbes, 'When The Financial Sector Catches On, We Create A Tipping Point For Change', Dina Medland

India’s green infrastructure plans are substantial: a target of 175 GW of renewables by 2022, a ramp-up of rail transport, energy efficiency projects and development of 100 “smart cities.” These opportunities require significant capital investment — and opportunities are what everyone is looking for, particularly a financial services sector struggling to reinvent itself after the financial crisis.

 

Environmental Finance, Climate-aligned bond universe grew by $96bn in 2015, says CBI, Hamza Ali

"Bridging the climate finance gap doesn't require complex new investment models. The re-alignment of bond market activity with climate change and low emission goals will deliver a stable long-term source of green investment," said Sean Kidney, CEO of CBI.

 

Blue & Green Tomorrow, Climate Bonds Initiative Publishes Annual Report

China leads the top 10 countries for climate aligned bonds with $246bn of total issuance (36%) followed by the US ($136bn/16%) then the United Kingdom and France ($62bn 9% & $64bn 9% respectively).

 

PV Tech, Global energy sector accounts for 19% of green bonds in 2016, says report, Danielle Ola

The report states that while the US$694 billion is an encouraging start, is nowhere near sufficient to remain within a 2ºC scenario. According to the International Energy Agency (IEA), cumulative investment of US$53 trillion is required by 2035 in the energy sector alone.

 

The Sydney Morning Herald, 'Climate-aligned' investments tipped to soar but Australia's role remains hazy

The report noted Australian issuance of unlabelled climate-aligned bonds is still small – in the order of $2.5 billion – and dominated by rail operator Aurizon.

 

Banking Day, Green bond issuance rises on the back of re-redefinitions

 

China China China

El Economista, China será el gigante verde del mundo, Mario Calixto

Spanish daily financial newspaper says China is becoming “the world’s green giant”and stresses role of the growing green bonds market in the country.

“China tiene ambiciosos planes para mejorar la intensidad energética, crecer industrias del medio ambiente y reducir el estrés ambiental”, de acuerdo con un estudio de CBI, organización que tiene por objetivo lograr 100,000 millones de dólares en colocaciones de bonos verdes para el 2016.

 

Financial Times, Green bonds, where is the muck

Article brings up China’s soil pollution problem: according to estimates 20% of arable land in the country is contaminated.  Role of green bonds in financing the clean up is stressed.

(…) cost of reaching the environmental targets could run as high as $300bn a year for the five years. China’s government might only pay for about 15 per cent of the bill. The shortfall is likely to be filled in part by increased use of green bonds – debt instruments issued for projects explicitly aimed at environmental appliactions.

 

Bloomberg, World’s Biggest Green Bond Seller China Meets Fund Skepticism, Lianting Tu

More and more scrutiny on China as it becomes world’s biggest issuer of green bonds.

With 95.4 percent of those (green bonds) offerings denominated in yuan and local standards differing from global ones, there are obstacles for foreign funds. Clean-coal power stations qualify for the status in China, even though they can conflict with some investors’ mandates.

 

Center of American Progress, Green Finance: The Next Frontier for U.S.-China Climate Cooperation

Center for American Progress article is an in-depth, evaluative analysis of policies put in place by China and United States to achieve their respective climate goals.

Of the new financing tools, green bonds have generated the most enthusiasm in China. In December 2015, the People’s Bank of China, or PBOC, issued the country’s first green financial bond guidelines to lay a regulatory framework for green bonds issued by banks and corporations. 

 

Bloomberg, China Approves $15 Billion of Green Debt in Pollution Fight, Lianting Tu

While $8.8 bn of green bonds were issued in China in 2015 so far (data as per June 2016), Bloomberg reports that in fact $15.2 billion of green bond issuance has been approved and is “now waiting for the best window” to go to the market.

China approved more than 100 billion yuan ($15.2 billion) of green bond issuance in the first five months of this year, as the world’s largest energy consumer bolsters financing for clean energy to help tackle pollution.

 

Bank of China (BOC) Big Green Bond

In July, Bank of China - one of the 5 biggest state-owned commercial banks in China, issued $3bn green bond in three currencies. It is one of the largest green bonds ever issued.

 

Financial Times, Bank of China goes green in first NY Rmb bond issuance

 

Financial Times, Bank of China issues $3bn in international green bonds

 

Reuters, Bank of China jumbo green bond shows growing Asian presence, Umesh Desai

 

Barron’s, How To Make Money From China’s Pollution, William Pesek

 

International Financial Law Review, China’s first US-issued RMB green bond explained, Brian Yap

 

China Economic Review, Bank of China issues $3bn in green bonds

 

Hong Kong

June saw a lot of media interest in Hong Kong and the potential for its “transparent” market to leave a “constructive stamp on the green bond industry”.

 

Reuters, Hong Kong could be a black belt in green bonds, Katrina Hamlin

Hong Kong could help whip the immature market into shape. The Special Administrative Region has a privileged relationship with mainland China, yet its financial markets are better regulated and more transparent. Hong Kong could raise the standard for green bonds with clear rules, and compulsory disclosure of financials and use of proceeds.

 

EJI Insight, Why Hong Kong must push green finance, Kenneth Leung Kai-cheong

(…) it really doesn’t take an expert to figure out that “green finance”, which refers to a global initiative to combine the world of finance and business with environmentally friendly activities, will present enormous business opportunities for global financial hubs such as Hong Kong.

 

Finances Wire, Is Hong Kong at the Forefront of a Green Finance Frenzy?

Hong Kong, in particular, has better regulated and more transparent financial markets than the mainland, and could go a long way towards leaving a constructive stamp on the green bond industry.

 

Asia Asset Management, FSDC unveils initiatives to propel Hong Kong’s green bond market

Also this month, the Financial Services Development Council released a report titled "Hong Kong as a regional green finance hub” which key recommendation is for Hong Kong to become the regional capital for green bond issuance.

(…) five key initiatives: issuing benchmark “green bonds” by government and public-controlled issuers; establishing a Green Finance Advisory Council or a similar body; hosting a global conference on green finance and investment (…)  building a cohort of green finance professionals via universities and professional institutions; and establishing a Green Labelling Scheme covering projects and securities.

 

CSR Asia, The growing global green bond market and its implications for Hong Kong and China, Karen Pong

Another key reason for the FSFC’s push to develop Hong Kong’s green bond market nk of pronounced after COP21, in which China pledged that CO2 emissions would peak and lower per unit of GDP by 60-65% by 2030 from the 2005 level.

 

Green Bond Markets

Financial Times, Green bond market faces growing pains, Gavin Jackson

Author suggests that it’s companies’ self interest that persuades them to issue and invest in green bonds and thus “clean up their acts”. It also brings up a “vexed” question of what is really green.

The market relies on the expectation that no company would want to incur the shame of issuing a “green” bond and not using the proceeds for environmentally friendly ends. That leaves the vexed question of trying to work out a commonly held definition of “green”, with the struggle to do so throwing up some uncomfortable ramifications for a market intended to accelerate the spread of a low carbon economy.

The article also available here: http://climatechangedispatch.com/green-bond-market-faces-growing-pains/

 

Financial Times, How to finance a new climate economy, Felipe Calderón 

Author – the former president of Mexico - outlines four key steps to unlock capital for low-carbon infrastructure. Green bonds are mentioned as one of the ways of shifting private capital to green economy.

And to truly green the financial system, companies and investors must acknowledge their exposure to climate risk and take it into account in investments decisions. Ignoring environmental factors that impact long term value is a failure of fiduciary duty.

 

El Economista, México podría emitir US2,000 millones en bonos verdes, Judith Santiago, Mario Calixto y Salomon Rodriguez

Sean Kidney, in an interview with El Economista, says Mexico has the potential to issue USD 2 billion (EUR 1.8bn) of green bonds in three years. He sees Mexico as a green bonds gateaway to Latin Amertica.

“Estamos buscando liderazgo en la región (…) México es uno de los países más adecuados para proporcionar ese liderazgo y exportar nuestro modelo a países que tienen condiciones similares”, aseguró Sean Kidney, quien también es consultor especial sobre bonos verdes para el secretario general de las Naciones Unidas. Dijo que México cuenta con un mercado desarrollado de inversionistas preocupados por el cambio climático.

(You can read the article in the print version of El Economista from 31.05.16. It was also republished by Juarez Noticias and is available online here: http://www.juareznoticias.com/mexico-podria-emitir-us2000-millones-en-bonos-verdes/ )

 

PV Tech, Green bonds and solar investment: what’s the future?, Katie House

Katie House – Climate Bonds Initiative researcher looks at how green bonds are rapidly evolving into a potentially major source of clean energy finance.

Global green bond markets need to grow into the hundreds of billions in annual issuance, with financing for clean energy comprising a large proportion of these new bonds. Climate finance success will in part be defined by how quickly we can fund the solar component of the world’s clean energy needs.

 

Global Capital, France may help green bonds, but no subsidies yet, Jon Ha

Jon Hay about ways the public sector could help the green bond market grow. 

Participants at the conference were not clamouring for subsidies — as one pointed out, bonds are a tax-efficient investment already — but there is clear interest in the idea. (…) Two speakers said that even if no subsidies were on offer, they would welcome governments, such as that of France, taking a lead in defining the market, by setting out what they considered the right projects to be eligible for green bonds.

 

AltEnergyStocks, Fossil Fuel Companies Should Be Issuing Green Bonds, Climate Bonds Team

 AltEnergyStocks republishes our article that explains why we think that fossil fuel companies shouldn’t be denied access to the green bonds market.

The urgency of climate mitigation means we encourage fossil fuel companies that wish to issue green bonds for ambitious green projects and should welcome them with open arms to the green bond market. Those fossil fuel companies that embrace a transition from their high carbon business model, should garner institutional investor support.

 

FTSE Global Markets, Luxembourg Stock Exchange, leader in green bond listing, becomes a Climate Bonds Partner

In June, we welcomed the Luxembourg Stock Exchange to the Climate Bonds Partners Program. It’s the second stock exchange to enter the program following the London Stock Exchange joining in April.

"Green finance is not a passing fashion, it is a real game changer. We believe it will become the foundation of future capital markets,” says chief executive officer Robert Scarfe. “Green bonds will be a central feature of this new marketplace. But for this to happen we will need more standardized approaches (…)”

 

Blue&Green Tomorrow, Luxembourg Stock Exchange Becomes Climate Bonds Partner

From London, Climate Bonds CEO, Sean Kidney, said: (…)“The Exchange and the Climate Bonds Initiative share a common vision about the importance of growing the role of international green finance in addressing climate change – we both believe green will be central to capital markets in the future.”

 

Environmental Finance, Advanced Topics in Green Bonds: Maximising Rewards, Philip Ludvigsen

The implementation of many of these de-risking actions would be difficult, if not impossible, without clear definitions and verifiable criteria. Fortunately, between the Green Bond Principles (GBPs) and the Climate Bonds Standard 2.0, such criteria are readily available.

 

Environmental Finance, Green bonds in Asia - the challenges and opportunities, Vicky Münzer-Jones

Investor demand for Asian green bonds comes not only from the more established green markets of Europe and the US, but also from Asia. 94% of the Agricultural Bank of China's green bond issue in 2015 was reported to have been sold to Asian investors.

 

Hydropower Working Group Launch

Hydropower Technical Working Group (TWG) under the Climate Bond Standard was launched in July to assess and develop Criteria for climate-friendly investment in the sector.

 

Blue & Green Tomorrow, Climate Bonds Calls For Hydropower Technical Working Group

Climate Bonds has convened a Hydropower Technical Working Group (TWG) to assess and develop criteria for climate friendly investments in hydropower.

 

HydroWorld.com, Climate Bonds Initiative hopes to create standard for hydroelectric power bonds through new working group, Michael Harris

The working group is charged with creating a "screening tool" to be used by investors to determine whether bonds linked to hydropower projects can be "considered consistent with limiting warming to a global average of 2-degrees Celsius," (..).

 

Altenergymag.com, Climate Bonds Convenes Hydropower Technical Working Group

The Hydro Technical Working Group (HTWG) brings together a host of industry, environmental, technical and water experts drawn from international NGOs, government and academia.

 

Water Power & Dam Construction, Climate Bonds Initiative launches Hydropower Technical Working Group

According to a statement from CBI, the TWG will be taking a robust science-based approach, one that looks at verifiable targets and metrics and takes into account in its analysis and assessment processes the environmental and social challenges that face some hydro developments.

 

----------------------------

More stories next month 

Climate Bonds Communications

 

Disclaimer: The information contained in this communication does not constitute investment advice and the Climate Bonds Initiative is not an investment adviser. Links to external websites are for information purposes only. The Climate Bonds Initiative accepts no responsibility for content on external websites.

The Climate Bonds Initiative is not advising on the merits or otherwise of any investment. A decision to invest in anything is solely yours. The Climate Bonds Initiative accepts no liability of any kind for investments any individual or organisation makes, nor for investments made by third parties on behalf of an individual or organisation.