Who: Report on the Global Green Bonds Market
What: Released by Moody’s Investors Service
When: 19 October 2015
Moody’s Investors Service on 19 October 2015 released a report on the global green bonds market titled Third Quarter Issuance Lags, but COP21-Linked Increase Is Likely.
The report says that in the third quarter (Q3) of 2015, the global green bond issuance reached 7.5 billion dollar, compared to bond issuance of 27.2 billion dollar in Q3 2014. But the increase is down from Q2, Moody’s expects issuance will pick up in the last quarter and exceed 40 billion dollar for the full year 2015.
Major highlights of the report
• Issuance continued to break new ground in the third quarter in terms of noteworthy and first-time transactions
• 7.6 billion dollar issued in Q3 lagged the 13.4 billion dollar that came to market during the second quarter of the year, but did outpace the first quarter’s 6.3 billion dollar.
• Based on the 9-month average monthly volume of 3.02 billion dollar, green bonds would end the year at 36.3 billion dollar, or just shy of the 36.5 billion dollar issued in 2014.
• The organisation expects the volume will pick up towards the end of the year to coincide with the December 2015 United Nations Framework on Climate Change (UNFCC) Conference of the Parties (COP21) in Paris and is likely to exceed 40 billion dollar for the full year 2015.
• Moody’s further notes that nearly half of the third quarter’s issuance proceeds, or about 4 billion dollars, are being earmarked for renewable energy projects. This is followed by 18.8%, or about 1.7 billion dollar, earmarked for sustainable water management followed closely by 1.6 billion dollar allocated to energy efficiency projects.
• Investment-grade issuance continued to dominate in the third quarter, but high-yield green bonds gained as a share of all Moody’s-rated green bond transactions.
• Nearly 18% of issuance in the third quarter was attributable to below-investment grade issuers, up from just 5% in the second quarter.
Highlights in case of India
• India has set a target of 175 GW of renewable energy capacity by 2022
• India that came up as an early leader in Asia’s incipient green bond is expected to be a prominent driver of regional issuance in coming years.
• India has established itself as an early leader in Asia’s nascent green bond market, with three India-based issuers came to market in third quarter (July to September 2015).
• It is expected that along with China, India will be a prominent driver of regional issuance in coming years, given ambitious targets on building out renewable energy capacity
What is a green bond?
A green bond, like any other bond, is a fixed-income financial instrument for raising capital through the debt capital market. In its simplest form, the bond issuer raises a fixed amount of capital from investors over a set period of time, repaying the capital when the bond matures and paying an agreed amount of interest (coupons) along the way.