Financial Times, Climate change is a business problem, Mike Scott
Probably the most interesting green bonds article of this month is one by Mike Scott of Financial Times. Written in the perspective of the UN IPCC report calling for a drastic action needed in order to avoid catastrophic temperatures rise, it highlights the role of investors in divesting from fossil fuels. Climate bonds are brought into the picture as a sound investment alternative:
One way to buy into low-carbon opportunities is climate bonds, which fund only emissions-reducing projects. Until recently almost all climate bonds were issued by multilateral financial organisations such as the World Bank and the European Investment Bank, but there is a growing market in corporate green bonds, says Sean Kidney... The market has grown from $3bn in the whole of 2012 to $9bn in the first quarter of 2014 alone.
“I think we are on track for $40bn by the end of the year and the market will hit $100bn in 2015,” Mr Kidney says. “Any issue that is green has been way oversubscribed”.
Business Green, Green bond market sees records tumble, James Murray
Our runner up for the best green bond article of the month is James Murray of Business Green with his in-depth analysis of the market developments following EIB pricing of its latest tranche of Climate Awareness Bond and GDF Suez €2.5bn green bond pricing.
Sean Kidney ..... welcomed the announcement [about GDF issuance], noting on the organisation's blog that the bond was of a significant size and appeared to be environmentally credible.
"When we first looked at the bond we were a little unsure. Firstly, the term 'energy efficiency' for a power producer (with significant coal and gas power generation) can mean all manner of things including making coal/gas power stations a little better (not very green in our view). However, thanks to the criteria put forward by independent reviewer Vigeo, such projects are automatically ruled out of this bond. The criteria ensure that 'the project is not linked to energy production by fossil fuels or nuclear sources and contributes to the decrease of GHG emissions of the business area'.
Environmental Finance, Assuring green bonds, Pernille Holtedahl, Matthew Jones and Douglas Farquhar, Principal Consultants at DNV GL
While exploring the question of ‘what is green’, authors highlight the need for standardized definitions of green in order to maintain the green bonds integrity. They highlight the Climate Bonds Standard as an example.
Do Green Bonds need assurance? There are essentially two types of assurance available in the green bond space: third-party verification against the Climate Bonds Standard, and second-party opinions that do not involve a standard and instead rely on the credentials of the institution issuing the opinion to provide integrity to the opinion.
Business Green, Green Project Bonds and Green Securitization are the next big thing for the Green Bonds Market , Bridget Boulle and Sean Kidney
In this article we argue for the need to rehabilitate securitization in order to catalyse the green growth.
"[...] Before you faint that I've just used the S word in a public space for responsible investment, hear me out... 90 per cent of business and project finance comes from bank lending. That's going to stay the case for the foreseeable future; bank lending is crucial to the financing of new infrastructure to build a low carbon economy. But, given that the recapitalization of banks is squeezing business lending, that lending will remain constrained unless they can get loans off their balance sheets."
Financial Times, Green bond credentials under scrutiny, Andrew Bolger
Andrew Bolger, an journalist who touched on the green bonds three times in the past month, wonders ‘what is green’ and highlights the possible differences over qualifying projects as green.
[..]However, interest in the sector has increased recently with the issuance of green bonds by companies such as EDF, another French power company, which in November raised €1.4bn, the first euro-denominated bond issued by a large corporation.
Wall Street Journal, How the green energy sector can help Wall Street do the right thing, Ed Sappin
While analysing the green market growth, author talks about wind and solar backed bonds as well as green bonds. The challenge – he points out – is still the scale of these investments that needs to increase to make the real impact:
[…] the scale needed to really make an impact in the green sector reaches the billions and trillions, while crowdsourcing is still in the thousands and millions. Maybe in the future, but it is likely going to be our investment banks, asset managers and corporates that help pave the way to green gold, and help the world’s environment in the process.
Financial Times, Green Economy: UN joins mission to balance investment goals, Gregory Meyer
The article talks about UN Environment Programme research into what a “sustainable financial system” would look like. While author calls carbon tax; ‘a political dead letter’, he points to green bonds as an area where sustainable investment is growing.
One area where sustainable investment is growing is so-called “green bonds”, which finance environmentally friendly projects. Bonds have been issued by international organisations, with the International Finance Corp, a division of the World Bank, raising $1bn last year to invest in renewable energy and “other climate-friendly projects” in developing countries.
Financial Times, Green bonds carry standard price tag, Andrew Bolger
Fact based analysis proving that pricing, yield and coupons of green issuance are in line with any other bonds.
A major concern of corporate bond investors regarding these green bonds has been that such bonds would contain some sort of premium, however small, to non-green bonds of the same issuer,” says Bob Buhr, an analyst with Société Générale. “This concern now appears unfounded."
ABC Australia, Investment in lowering carbon emissions could stimulate economic growth, Michael Molitor
Author argues that the best way to stimulate global growth is to invest heavily in renewable energy sources. While pointing to institutional investors as source of money, he calls green and climate bonds: ‘the fastest growing new asset classes’.
The fastest growing new asset classes are green bonds and climate bonds. Investment into low- and zero-carbon energy assets is advancing largely on the basis of key underlying trends in capital markets.
Energy Post, What oil companies do is bad for the climate. But it may also be bad for investors, Sonja van Renssen
Article analyses the ‘unacceptable economic risks’ associated with investing in oil projects based on the prospect of oil prices dropping in the near future. Climate bonds are presented as an alternative for investors divesting from fossil fuels.
Money divested from carbon-intensive fossil fuels will not necessarily flow into efficiency or renewables of course. This is where policymakers have a job to do to create new, green investment opportunities. These are starting to emerge – the market for climate bonds has exploded in the past year, says Sean Kidney, CEO of the Climate Bonds Initiative for example – but it is early stages yet.
And the bunch of stories reporting on the Standard &Poor's report which predicted the doubling of the corporate green bonds market in 2014. Climate Bonds Initiative contributed data to the report.
Business green, Standard & Poors expects $20bn of green bonds in 2014, Will Nichols
[…] Its prediction for $20bn of green bonds this year is actually a little on the conservative side, according to some in the market. The Climate Bonds Initiative has raised its forecast for 2014 from $10bn to $40bn following a surge in activity in the first quarter of the year.
CNBC, Bond market to go ‘green’ this year: S&P, Katy Barnato
"The bulk of the growth is going to come out of corporate growth," said Sean Kidney, the organization's CEO, on Tuesday. "It is not a substantial new volume of money, but it does create a large liquid market."
Bloomberg Green Energy Finance, Green Bonds From Companies Seen Doubling to $20 Billion, Marc Roca
Green bonds are used by governments, companies, banks and international financing institutions. The value of the market will reach $40 billion this year, according to the Climate Bonds Initiative, a non-profit organization.
Financial Times, Bond markets join the green revolution, Andrew Bolger
The Climate Bonds Initiative, a non-profit organisation that promotes investments to combat climate change, predicts total green bond issuance from all sectors will reach $40bn in 2014.
