The ESG frenzy continues: €105bln in 8 months.

ESG fund launches are all the rage at the moment, but governments are also getting in on the act with record levels of “green bond” issuance. The ESG theme is here to stay and you’re likely to get more and more queries from your clients so it is worth getting up to speed now.

Below is a quick introduction to the 13-year history of Green Bonds and why you should be interested.

Climate awareness bonds were first issued in 2007 by the European Investment Bank (EIB) to raise funding for climate related projects. The World Bank then followed in 2008 issuing the first ever labelled “green bond”.

Interest in green bonds picked up in 2012, with the launch of the Climate Bond Standard[1] which provided clarity in labelling of green investments. But 2013-2014 really marked the inflection point for growth in green bonds, in terms of both volume and issuer diversity, when The International Capital Markets Association (ICMA) released the Green Bond Principles[2].

Growth accelerated further from 2015 through to 2017, led initially by the EIB, but then followed by a surge in Asian, and in particular Chinese, issuance in 2016 and US issuance in 2017.

The EU currently lead the way on this with numerous initiatives such as The EU Green Deal and The EU Taxonomy,so it’s no surprise to see the region topping the green bond charts. In 2019, the European market accounted for 47% of all global issuance.

Germany recently made its debut in the green bond market with a €6.5 billion issue – the largest sovereign issue of green bonds to date. Germany also plans a number of other green bond issues at different maturities to build out a “green yield curve” for the euro area.

This latest issuance took the European total for 2020 to almost €105bn – just shy of 2019’s full year record of €107bn, with four months of 2020 still remaining.

The green bond market continues to evolve as increased demand from investors has allowed the market to develop from a small, illiquid market, to the larger, more diversified market of today. This has helped a well-functioning secondary market to develop and has encouraged institutional investors to enter the green bond market – both of which are supportive of further growth.

If you’d like to learn more about green bonds and all things ESG please download our recent white paper: ESG in Investing: everything you wanted to know but were afraid to ask.