Rapid growth of the green labelled market
The green bond market has taken off in recent years, with the market really starting to take off in 2015 when USD 42 billion was issued; almost four times the 2013 issuance (USD 11 billion).
This momentum has continued strong, with USD 200 billion in green bonds currently outstanding. There are projects for possibly USD 130 billion to be issued in 2017.
Using debt capital markets to fund climate solutions
Green bonds were created to fund projects that have positive environmental and/or climate benefits. The majority of the green bonds issued are green “use of proceeds” or asset-linked bonds. Proceeds from these bonds are earmarked for green projects but are backed by the issuer’s entire balance sheet. There have also been green "use of proceeds" revenue bonds, green project bonds and green securitized bonds.
Types of green bonds
Green Bonds are standard bonds with a green as a bonus feature
The green “use of proceeds” bond market has developed around the idea of flat pricing; where the bond price is the same as ordinary bonds. Prices are flat because the credit profile of green bonds is the same as other vanilla bonds from the same issuer. Therefore green bonds are pari passu to vanilla issuances.