Global green bond issuance looks set to scale new heights, if a new industry report on issuance levels is anything to go by.
Moody’s Investors Service has forecast a 20% annualized jump in issuance to $200 billion in 2019, citing continued issuer diversification and greater clarity around standards that have been providing a boost to the market.
Despite slower growth in 2018, a broader focus on sustainability will also drive growth in social, sustainability and other labelled bonds, the rating agency added.
Green bonds analyst at Moody’s, believes that among the factors supporting the long term growth of the sector, more active participation from US non-financial corporates is noteworthy.
“The utilities sector, for example, is expected to see a 30% increase in maturities in 2019, which could provide an opportunity for more green bond refinancings.”
Overall, the way Moody’s view things – investor demand for green and sustainable investment products will continue to grow in 2019 and far outpace the supply of such bonds. “In addition, heightened commitment to addressing climate change will drive growth as governments increasingly seek to finance climate mitigation and adaptation projects with green bonds,” Kuchtyak said.
A growing number of repeat green bond issuers, which account for three-quarters of total issuance in valuation terms, also bodes well for sustained market growth.
As the green bond market matures, Moody’s expects “continued diversification” in issuance in terms of sector, region and use of proceeds. In addition, greater clarity around global green bond standards could help more precisely define which projects qualify as “green” and help grow the market even further over the long run.
The report also notes a rise in the issuance of other types of thematic fixed income instruments alongside the growth of the green bond market, and the increased use of the United Nation’s Sustainable Development Goals as a means of aligning financial investments with long term environmental and social objectives.
Broader adoption of these goals could further expand the pipeline of sustainable investment products globally, Moody’s concluded.