25 September 2018: A report published by the Climate Bonds Initiative (CBI) underscores significant potential for the growth of the labeled green bond market. The report identifies US$1.45 trillion in climate-aligned bonds, including US$389 billion in green bonds. This suggests a large “universe” of unlabeled bonds financing green infrastructure, which implies “huge” potential for a larger and more diverse green bond market.

The report titled, ‘Bonds and Climate Change: The State of the Market 2018,’ was launched on 24 September 2018 during Climate Week NYC. It analyzes the labeled green bond climate-aligned universe, highlighting investment opportunities to finance assets related to clean energy, low carbon transport, water management, low carbon buildings, waste management and sustainable land use. The report also examines the diverse bond structures used in the green bond market.

According to the report, US$90 trillion of investment in climate projects is needed by 2030, and that to successfully combat climate change, global green finance must reach US$1 trillion by the end of 2020, and grow each year thereafter.

While previous reports focused on identifying issuers that derive more than 95% of revenues from green business lines, the 2018 report broadens the scope to include issuers that derive 75-95% of revenue from green business lines. The report covers climate-aligned and green bonds issued after 1 January 2005 and before 30 June 2018.

Renewable energy investment must scale up quickly to meet Paris Agreement goals and SDGs 7, 8, 9 and 13.

The 2018 report also includes the SDGs for the first time. It indicates that SDG bonds have emerged, and identifies six SDGs where increased green investment results in direct benefits: SDG 6 (clean water and sanitation), SDG 7 (affordable and clean energy), SDG 9 (industry, innovation and infrastructure), SDG 11 (sustainable cities and communities), SDG 13 (climate action) and SDG 15 (life on land). The publication notes that climate change mitigation measures, adaptation and the development of climate-resilient infrastructure and buildings contribute to all 17 SDGs.

More specifically, the report notes that in order to meet the goals of the Paris Agreement on climate change and support SDG implementation, in particular SDGs 7, 8 (decent work and economic growth), 9 and 13, renewable energy investment must scale up quickly. It highlights that US$450 billion of annual investment is needed to meet SDG 6.

The report concludes that, inter alia:

• the US, China and France issue the most labeled green bonds, followed by supranational organizations, Germany, the Netherlands, Sweden, Spain, Canada and Mexico;
• the energy and building sectors issue US$90 billion and US$70 billion in green bonds, respectively;
• 498 green bond issuers with US$389 billion of outstanding bond volume account for 32% of the climate-aligned universe; and
• transport is the largest “theme” in the climate-aligned universe at 44%, followed by energy at 23% and multi-sector at 15%.

The green label helps finance climate-aligned assets and projects, and enables easier identification of green fixed income products for investors, the provision of finance for low carbon assets and access to a wider investor base for issuers. [Publication: Bonds and Climate Change: The State of the Market 2018] [Report Landing Page] [Climate Bonds Initiative Press Release] [UNFCCC Press Release]