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In recognition of clean energy progress, green bonds shoot past trillion-dollar mark

Cumulative green bond issuance by quarter, 2007-3Q 2020 Credit: BloombergNEF, Bloomberg L.P.

According to research company BloombergNEF (BNEF), green bonds have passed their biggest milestone yet, with more than $1 trillion issued since these securities first emerged in 2007.

BNEF says that green bonds are the longest standing and most heavily used instrument in the sustainable debt market, which covers a range of fixed-income products offering environmental and social benefits.

Green bonds are used to finance sustainable infrastructure, from wind farms to wastewater management. More than $200B worth of green bonds have been issued in 2020 alone, according to the research firm. This represents a 12% increase compared with the first nine months of 2019. Together, corporate, government, municipal and mortgage green bond issuance in 2020 trailed 2019’s volumes through August. This all changed in September, when green bonds saw more than $50 billion brought to market in that month alone.

“For much of this year, green bond issuance has lagged behind 2019. But the bumper month in September, with more than $50 billion issued, offers hope of a possible boom in the last quarter of the year,” said Mallory Rutigliano, a sustainable finance analyst at BNEF.

One of the biggest boosters this September came from Germany. The federal government issued a 6.5 billion-euro ($7.7 billion) sovereign bond at the start of the month, making it this year’s biggest single new green bond. Similarly, the Swedish government and Électricité de France (EDF) helped jumpstart the month, with more than $5 billion combined.

In reaching their cumulative $1 trillion issuance milestone (see chart above), green bonds have also pushed the wider sustainable debt market – which includes social bonds, sustainability-linked loans,  green loans and others – over the $2 trillion mark.

Maia Godemer, a BNEF sustainable finance associate, commented: “The integration of environmental, social and governance criteria has never been more important for investors than in 2020. We’ve seen this reflected in the debt market, and it is not only likely that these varieties of financing will grow in volumes in coming years, but we will see further innovation. One driver is likely to be increasing pressure to standardize rules around green bonds, particularly in Europe.”