Investment Gone Green: Green Bonds

The rapid growth of the international green bonds’ market demonstrates how the capital market can be utilized to address the consequences of global, environmental, and climate change.

Since the issue of the first green bonds by the European Investment Bank (EIB) in 2007, the market has grown exponentially, with a projected issuance of $200 billion in 2018 from $155 billion in 2017i. The rapid growth of the international green bonds’ market is demonstrating how the capital market can be utilised as a mechanism to address the consequences of global environmental and climate change. Green bonds can also be particularly attractive to investors looking for corporate social responsibility opportunities, in line with global best practice, which have not been available via fixed income investments till date.

Green bonds are fixed income securities that are issued to finance or refinance environment and climate beneficial projects (green projects), such as renewable energy, waste management, and pollution prevention projects. The structure of a green bond transaction is very similar to that of a traditional bond. The difference, however, lies in the application of the proceeds and the auditing and reporting requirements.