Agency: Global green bond issuance is expected to reach new highs in 2021
In the context of low-carbon green transitions in various countries, global green bonds maintained a growth momentum last year. At the beginning of 2021, the global green bond issuance has not diminished. Many institutions have recently expected that global green bond issuances this year are expected to increase substantially and reach new highs.
New Year’s release continues to be active
Entering 2021, the global green bond issuance continues to grow hot.
In China, on February 8, the first batch of six carbon-neutral bonds nationwide was successfully issued on the inter-bank bond market. This is also the world’s first labelled green bond product named “carbon neutral”, with a total issuance of 6.4 billion yuan.
On February 3, Zhuhai Port Holdings Group Co., Ltd. was successfully listed for the first 2021 green bond financing plan of US $ 200 million. On February 1, Bank of Suzhou issued an announcement stating that it had successfully issued green financial bonds in the national inter-bank bond market recently. In a short period of 20 days in the first half of January, five real estate companies including Sony Holdings, CCRE Real Estate, Modern Real Estate, Yuzhou Group, and Zhengrong Real Estate issued a total of US$1.722 billion of green senior notes, ushering in a climax of green bond issuance…
Overseas, on January 14, SK Hynix announced the issuance of US$1 billion in green bonds to invest in green environmental protection projects and accelerate the pace of environmental, social and governance (ESG). This is also the first green bond issuance among global memory semiconductor manufacturing companies.
On January 25, the Bank for International Settlements launched open-end funds denominated in euros for central banks and official institutions to invest in green bonds. The European Central Bank decided to invest part of its own fund portfolio here. Previously, the Bank for International Settlements launched the first green bond fund denominated in US dollars in September 2019. The two funds will replace central banks in the management of approximately US$2 billion in green bonds.
On January 25, the official website of the Hong Kong Monetary Authority announced that it had successfully sold the second batch of green bonds with a total issuance of US$2.5 billion under the government’s green bond program. In this issuance, the 5-year, 10-year and 30-year issuance amounts are US$1 billion, US$1 billion and US$500 million respectively. The 30-year term is the first 30-year green bond issued by the government in Asia, and it is also the longest-term bond issued by the Hong Kong Special Administrative Region Government. This transaction has attracted different types of traditional and green investors. The 5-year and 10-year terms received more than 5 times the subscription amount, and the 30-year term received more than 7 times the subscription amount. Institutional investors in Asia received 65% of the total issuance, while European and American investors received 20% and 15% respectively. The bonds were settled on February 2 and were listed on the Hong Kong Stock Exchange and the London Stock Exchange. The bonds were rated by S&P Global AA+ and Fitch AA-.
Also, according to Bloomberg News, the head of the Colombian government’s public credit department, Cesar Arias, said that starting from the second half of this year, the Colombian government will issue bonds worth 2 trillion pesos in monthly auctions to generate electricity and reduce energy from renewable energy. Provide funding for green projects such as transportation fuel consumption and forest protection. According to the plan, these bonds have a maturity of 20 years. Since then, Colombia will continue to issue more green bonds.
Annual release or record-breaking
In 2020, global green bond issuance set a record, and many institutions believe that green bond issuance will increase significantly this year.
According to Reuters, a report by the Climate Bonds Initiative (CBI) on January 25 showed that as of the end of 2020, global green bond issuance reached a record US$269.5 billion, slightly higher than the US$266.5 billion in 2019. The United States issued the greenest bonds with a total value of US$51.1 billion, followed by Germany’s US$40.2 billion and France’s US$32.1 billion. The proceeds from these green bonds are mainly used for investment in the energy industry, followed by low-carbon buildings and low-carbon transportation. According to data from Reuters, the issuance of bonds to fund sustainable development projects tripled last year to a record high of US$544.3 billion.
According to estimates by the ESG Consulting Team of the Investment Banking Department of Deutsche Bank, the demand for ESG bonds in the global market has increased by 75 times in 2020. According to data from JP Morgan Chase, by the end of 2020, the scale of global ESG investment assets has reached approximately US$45 trillion.
According to data released by Bloomberg New Energy Finance, in the field of ESG investment, governments and major companies around the world sold a total of more than $732 billion in bonds in 2020, a record high.
China’s green bond issuance has developed rapidly. According to the “2020 Green Bond Annual Development Report” of China Chengxin International Credit Rating Company, the cumulative domestic green bond issuance has reached 1109.554 billion yuan.
Many institutions continue to be optimistic about the prospects for global green bond issuance this year. According to the British Financial Times, SEB Bank of Sweden predicts that the issuance of green bonds this year will reach 500 billion US dollars, and the European Union alone will issue more than 270 billion US dollars of green bonds. The CBI report predicts that the global issuance of green bonds may reach US$400 billion to US$450 billion in 2021. The international rating agency Moody’s recently predicted that the global issuance of green, social and sustainable development bonds will reach a record US$650 billion in 2021. Moody’s expects that the Biden administration will accelerate the momentum of sustainable development in the US financial industry and that emerging market debt will resume sustainable growth after falling in 2020.
Multiple positives support green bond issuance
The agency believes that global green bond issuance is supported by multiple positive factors, including the United States’ return to the Paris Agreement to combat climate change, the European Union’s ambitious green energy targets, and investors and policymakers increasingly paying attention to decarbonized industries. Last year, due to the impact of the new crown pneumonia epidemic, the issuance of global green bonds was once affected. In the context of the post-epidemic era of the global economy shifting to a green and sustainable model, green finance will become more mainstream.
Georgieva, President of the International Monetary Fund (I MF ), believes that green projects are vital to the global recovery from the epidemic.
CBI pointed out that the proposal of carbon neutrality targets in various countries has become an inflexion point. In this context, the resilience of the green financial market last year brought record circulation.
From the perspective of government promotion, some governments have strengthened their commitment to the green agenda to accelerate the economic recovery from the epidemic and achieve sustainable economic growth. Take the European Union as an example. Before the outbreak, the European Union officially announced the “European Green Agreement” in January 2020. It is estimated that 1 trillion euros will be invested in green industries in the next ten years to achieve the goal of carbon neutrality. In the economic recovery fund formulated and passed after the outbreak, the EU attaches great importance to green development. Member states can only obtain relief funds if they commit to investing a considerable part of their funds in green technologies. In September 2020, the EU also plans to issue 225 billion euros of green bonds to stimulate the economy and start the “green bond revolution.” The European Central Bank will purchase ESG bonds, making it the first central bank to include ESG bonds as eligible assets into its quantitative easing policy.
Multinational companies are also actively participating in various ESG activities to deal with environmental issues including climate change in advance. Goldman Sachs recently announced that by 2030, it will invest $750 billion in investment, financing, and consulting activities in sustainable finance such as climate transition and inclusive growth. UBS also increased its core sustainable investment by more than 56%, and its core sustainable assets have reached US$488 billion.
China is an important force in green bond issuance. Since the launch of the labelled green bond market in 2016, the annual issuance scale has remained above 200 billion yuan, and the cumulative issuance scale ranks second in the world. The “Global Banking Outlook Report” recently released by the Bank of China predicts that China’s green finance business scale is expected to reach about 16 trillion yuan in 2021.