Research on the burgeoning green bond market by Nordic corporate bank SEB predicts that demand this year will extend to new regions and sectors
In an analysis of the opening months of 2017 and predictions for the rest of this year, Christopher Flensborg, SEB’s head of climate and sustainable financial solutions, maintains his 2017 year-end green bond market potential issuance figures at US$125bn in a baseline scenario, but adds that there is an upside potential for issuance to rise to US$150bn.
Flensborg believes the green bond market is maturing and diversifying, with new regional hotspots emerging – such as Australia – alongside new sectors such as insurers and healthcare providers.
Meanwhile, other jurisdictions are taking time to digest the rapid acceleration and development of the market – for example in China – and consolidating strategies.
Among the findings in SEB’s latest report:
- The first quarter of 2017 broke the previous year’s Q1 record US$15.3bn of green bond issuance, rising by 83% to US$28.1bn. By the end of April, velocity of issuance had slowed, with a 62% increase year-on-year (YoY) from April 2016 to US$35bn. At the beginning of May, issuance stood at US$35.8bn, a figure that it took until the end of June to reach last year.
- Key enablers and drivers continue to underpin heightened green infrastructure investment demand and green bond financing. Combined with increasing appetite from institutional investors, these factors behind the momentum from 2016 are continuing to propel green bond issuance in 2017.
- Green securitisations have increased by over 260% YoY, rising to US$2.2bn.
- Government agency issuance doubledto US$4.8bn, while municipal and sub-sovereign issuance rose by 25% to US$ 3.4bn YoY.
- Supranational institutions, such as multilateral and regional development banks, bucked the trend – down-33% YoY to US$2.3bn and lagging what would be expected to meet the potential for US$10bn of issuance penciled in at the start of 2017.