Clear to see a US$5 trillion a year green future

Published: November 19, 2021

Green bonds burst onto the scene more than a decade ago and in that time have moved from niche corner of the market to pumping out hundreds of billions of dollars of new debt a year. Now, with the UN Climate Change Conference in Glasgow (COP 26) including a finance day, the financial market’s ability to help the world avert the worst of climate change is at the forefront.

The growth of the green bond market has been nothing short of exponential, with a 49% a year growth rate in the five years leading up to 2021, according to the Climate Bonds Initiative.

Annual green bond issuance could pass more than US$ trillion by 2023, the CBI reckons, even on a more modest growth trajectory.

This is quite the growth story for a deal structure that started with a SK2.3bn (€230m) green bond that the World Bank to a group of Scandinavian investors at the tail end of 2008.

“The base idea of the initial green bond was to make it simple, it’s a copy paste of an existing mandate,” said Christopher Flensborg, head of climate and sustainable finance at SEB, also referred to by many in the market as the father of green bonds for his role in structuring the first deal and championing the structure since. 

“The only thing you needed to identify was if the risk return was okay,” he told EMEA Finance. “If it was okay, you got the engagement and information for free. With that philosophy, you can change the bond market.”

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