17 January 2018
SEB predicts ‘modest growth’ for green bond market in 2018
Swedish bank SEB expects 2018 will be “a year of consolidation and more modest growth” for green bond issuance than in 2017, with potential to grow 12% year-on-year, to $175 billion.
The market has a “possibility to surprise”, with the potential to reach $210 billion in the best-case scenario, which would be 35% above the 2017 total of $156 billion, the bank said in a research note.
SEB predicts the US has the potential to retain top spot for new issues in 2018, growing to $45 billion from $37.8 billion, followed by China, which it suggests could grow to $34 billion, from its 2017 total of $30.7 billion.
Germany’s issuance is projected to jump 50% this year, to $15 billion. This is likely to be driven, in part, by government-owned development bank KfW, which is the second-largest issuer of green bonds, and has total outstanding green bond issuance of €12.9 billion.
SEB also suggests 2018 could see between $34 billion and $46 billion of new green securitizations, up from $26 billion last year. It also forecast a growth in corporate issuance to between $49.5 billion and $63 billion, up from $42.3 billion in 2017, while sovereigns are projected to issue between $17.5 billion and $22 billion this year.
The Swedish bank noted that the overall total for 2017 exceeded the upper range of its previous forecast, which was for $125 billion – $150 billion.
China publishes guidelines for green bond verifiers
Guidelines for green bond verifiers and verification activities in China have been published by the People’s Bank of China (PBoC) and China Securities Regulatory Commission (CSRC), marking the first time a government has developed regulatory supervision of verifiers.
The guidelines introduce regulatory requirements for verifiers in the areas of reporting and verification, as well as qualifications they must obtain. They are broadly modelled on the Climate Bonds Initiative’s Climate Bonds Standard & Certification Scheme.
Verifiers will have to undertake both pre-issuance verification and post-issuance tracking – which is a requirement of the Climate Bonds Standard & Certification Scheme but not ICMA’s Green Bond Principles.
A Green Bonds Standard Committee is in the process of being set up to oversee the application of the guidelines. It will have the power to make spot checks of verifier reports, and request peer reviews.
Verifiers in China will be required to register with the committee and provide evidence of established internal procedures, pricing structure and quality control.
Chinese regulators say they also intend to incorporate a penalty mechanism into the new rules, to deal with submission of false information, or a breach of professional ethics and independence requirements.
KfW starts the year with the issue of SEK 1 billion green bond
KfW has issued a SEK 1 billion ($120 million) green bond, its first of 2018.
The Swedish krona-denominated green bond priced on Tuesday at 11 basis points below mid-swaps, with a coupon of 0.46% and a five-year tenor. Nordea was sole bookrunner in the transaction.
Petra Wehlert, head of capital markets at KfW told Environmental Finance that although the bank has not set a target for issuance of green bonds in 2018, it will this year issue two green bonds that will each have the equivalent value of at least 1 billion, in the “core currencies” of the euro and US dollar.
In 2017, KfW’s green bond issues totalled €3.7 billion.
In addition to its plans for issuance, the bank will invest €300 million in “high quality” green bonds in 2018 in expectation of increased green bond supply, according to Rita Geyermann, head of asset management and first vice president at KfW Group.
Michael Hurley, Marine Durrieu