The climate-themed bond market is broader and deeper than expected
The Climate Bonds Initiative, in association with HSBC Climate Change Centre of Excellence, today launches a new report on the current size and future prospects for climate-themed bonds.
The Report gives a snapshot of the climate-themed bond markets’ size, the key investments themes and regional market, and finally identifies three key ways to accelerate market expansion.
> At NYC Environmental Conference this week Citibank director of structured finance Stuart Murray said: "The Climate Bonds market is ready to explode." He added: "The demand for climate bonds among investors we talk to is robust ... the issue is just that we’re not seeing that many bonds coming to market." Come on originators!
Media release below | Read the Executive Summary | DOWNLOAD FULL PAPER NOW
Renewable Energy Covered Bonds - how to adapt the covered bond market to bring capital into the low-carbon economy
Climate Bonds Initiative suggests covered bonds as a means to get bank lending flowing again
CDC Climate has published a useful paper on green bonds. They suggest that at a time when bank lending is squeezed, green bonds offer an alternative financing for initiatives with an environmental goal.
Across Europe and a number of other regions bank recapitalisation pressures have led to a reduction in business and project lending - and thus reduced renewable energy lending.
This is a problem because the bulk of project finance (95% globally) comes from bank lending.
The development of a market for securitized renewable energy and energy efficiency assets and loans, allowing banks to quickly recycle limited loan capital, is going to be vital to ensuring banks deliver the project finance needed as we “green” energy systems.
This guest report by guest contributor Tadhg Molony explores the current state of the securitization market and its prospects going forward.
By guest blogger “Corporate Bonder”
Market Overview
Data compiled by the Bank for International Settlements[1] indicate that the total size of the global debt securities market (domestic and international[2]) was $98.7 trillion as at September 2011, of which $89.9 trillion were notes and bonds. Governments accounted for $44.6 trillion of outstanding debt securities, financial organizations $41.9 trillion, corporations $11.2 trillion and international organizations $1.0 trillion.
> In Korea, in the centre of dynamic Seoul, Jeffrey Sachs has just spelt out the painful truth in his speech to the Global Green Growth Summit:
“We are in deep trouble. Things are not working to fix the biggest problem we’ve had to fix. We have failed to do what, 20 years ago, we set out to do. We have squandered that 20 years.
This is an issue where you can feel good about a demonstration project here and there; but the scale of the impact is overwhelming us all.
Every successful economy has fossil fuels in its DNA. It can be hard to appreciate the nature of the challenge before us. To change direction is to deeply change the hardwiring of our economies.
> The IFC on Friday issued a $500m Green Bond in the US market. Rated AAA, the three-year bonds was underwritten by JP Morgan. This is the first IFC green bond targeting US investors. All proceeds go to climate change related investments. Investors include BlackRock, TIAA-CREF, Climate Bond Standards Board member CalSTRS and the United Nations Joint Staff Pension Fund. The coupon is 0.5!
> The European Investment Bank issued a 7 year, 3%, SEK1 billion ($148m) Climate Awareness Bond last week. Underwriters were SEB (Christopher Flensborg is at it again) and Deutsche Bank. Looks like Swedish funds continue to have appetite for climate and green bonds.
> Climate Bond talks are everywhere this Spring:
> According to BusinessDay and Responsible Investor, South Africa’s state-owned Industrial Development Corporation is issuing a R5.2 billion green bond to finance clean energy projects. Expected return is 9%. R1bn of the bond was bought by the USD115bn South African Government Employees’ Pension Fund (GEPF).
