Earlier this year, Unilever issued a $416 million green bond. Forty percent of the offering was quickly bought by asset managers, insurers, and pension funds outside of the U.K., an unusual response to a sterling bond. That story is part of a larger one, the rapid rise of green bonds in the global investment market, according to a recent article in The Economist.
The numbers tell the tale. In 2012, $3 billion of such bonds were sold. In the first six months of this year, the total was $20 billion, twice as much as all of 2013. Many bond issues have been two or three times oversubscribed. In another change, 50 percent of 2014’s bonds have been issued by companies, a shift from earlier offerings sold mostly by international agencies such as the World Bank. The estimated value of all green bonds is $50 billion by the end of this year.
What makes a bond “green?” The World Bank has proposed criteria for projects financed by green bonds to standardize the new products, including reporting and compliance systems investors. To service the new market for corporate bonds, independent groups such as the Centre for International Climate and Environmental Research now give second opinions. And 13 banks have partnered to create a shared set of principles governing different categories of green bonds. Forty-nine institutions have signed up to date. With these rapidly growing numbers, green bonds are on the way to becoming a significant part of the global investment market.
Article by John Howell.