5 January 2018

Green bond market poised to scale new heights in 2018

Green bond market poised to scale new heights in 2018

The green bond market is expected to keep up the momentum it built last year, with another record performance in 2018, according to TD Securities and SEB.

In its latest report, TD projects that green bond issues this year will total $160 billion, as the sector continues to gain traction.

Gennadiy Goldberg, senior US rates strategist at TD Securities, said the green bond market growth will be driven by further corporate and sovereign bond issuance.

TD estimates that a total of $119 billion green bonds was issued in 2017, exceeding its expectations for $105 billion.

On an even more optimistic note, SEB said the market has the potential to grow to $175 billion in 2018, with possibility to surprise and reach $210 billion.

The market exceeded the $100 billion barrier for the first time in November, following a spree of issues.

According to data from Environmental Finance's Green Bond Database, TD Securities has managed 24 green bond transactions, of which its share is valued at $3.67 billion.

Regarding sovereign green bonds, TD Securities said that "the warm reception to France's green OAT issue should encourage other governments to follow suit, with Belgium announcing plans to issue €3 billion ($3.6 billion) to €5 billion in green bonds in the first quarter".

Earlier this week, Nigeria said its inaugural 10.59 billion naira ($29.7 million) green bond was oversubscribed. (See feature on the potential for sovereign green bonds here)

TD Securities cited media reports suggesting that Italy and Sweden have similar plans in the near future.

"Interestingly, this has occurred despite the US exit from COP21, suggesting that fundamentals rather than politics are behind the growth in the green bond space," Goldberg said.

According to data from TD, corporate green bond supply nearly doubled from $24 billion to $41 billion in 2017, as consumers "continue to pressure companies to be more socially responsible – a trend that is expected to continue."

TD partly attributed the surge in green bond issues to increased concern about climate change, which has drawn additional funds into the sector.

The first week of 2018 has already seen the first mini-benchmark issue – from Swire Properties, a Hong Kong-based real estate firm, which marketed its inaugural, green bond, raising $500 million.

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