Green bond is­suance could ex­ceed $50 bln

Financial Mirror (Cyprus) - - FRONT PAGE -

Moody’s said that global is­suance of green bonds could sur­pass $50 bln in 2016, ex­ceed­ing the $42.4 bln recorded in 2015, which was also the high­est level for such bonds since they first ap­peared in 2007.

“We ex­pect the mo­men­tum from the UN Con­fer­ence on Cli­mate Change (COP21) as well as the sign­ing of the Paris Agree­ment sched­uled this April to likely mo­ti­vate ad­di­tional and re­peat is­suance of green bonds,” said Henry Shilling, a Moody’s Se­nior Vice Pres­i­dent.

“In this favourable en­vi­ron­ment, even af­ter more re­cent bond mar­ket head­winds, and as­sum­ing a re­sump­tion of the growth rates seen in 2012-14, is­suance could ex­ceed $50 bln by a sig­nif­i­cant mar­gin,” said Shilling.

“While vol­ume growth in 2015 had slowed to 16%, it had ex­hib­ited gains of 158% in 2012; 255% in 2013; and 233% in 2014.”

Moody’s said that fur­ther sup­port for is­suance in 2015 will come from con­tin­u­ing in­sti­tu­tional, high net worth and retail in­vestor ap­petite for green bonds.

The rat­ing agency also said that reg­u­la­tory en­cour­age­ment to is­sue and in­vest in green bonds along with the pres­ence of newly is­sued guide­lines for such bonds in China and In­dia will bol­ster is­suance as well.

In par­tic­u­lar, China’s green bond mar­ket could po­ten­tially ex­pand more rapidly than in­ter­na­tion­ally des­ig­nated green bonds in 2016 due to cen­tral bank pol­icy sup­port and in­cen­tives an­nounced for fi­nan­cial in­sti­tu­tions is­suers in the form of col­lat­eral el­i­gi­bil­ity, re­lend­ing and in­ter­est sub­si­dies — terms which are gen­er­ally not avail­able in other coun­tries.

Early in 2016, green bonds from non-fi­nan­cial cor­po­ra­tions re­ceived a boost with pro­posed guide­lines by the Chi­nese Na­tional De­vel­op­ment and Re­form Com­mis­sion (NDRC).

Look­ing back on 2015, Moody’s noted that 105 dis­tinct is­suers came to mar­ket with 197 trans­ac­tions, av­er­ag­ing $215 mln. Of the to­tal of $42.4 bln is­sued, fi­nan­cial in­sti­tu­tions were the largest sin­gle is­suer in terms of type of in­sti­tu­tion, ac­count­ing for about $17 bln, or 40%.

Global is­suance for green bonds spiked in Q4 2015, bol­stered by ac­tive is­suance from fi­nan­cial in­sti­tu­tions in Novem­ber just ahead of the start of COP21, reach­ing $15.2 bln, the high­est quar­terly fig­ure for the year.

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