July 12, 2024
Green Bond Market

Global Green Bond Market Is Estimated To Witness High Growth Owing To Increasing Environmental Awareness And Increasing Sustainable Investing

Overview:

Green bonds are a type of fixed-income financial instrument issued by governments, corporations, or other entities to raise funds for projects with specific environmental benefits. The key objective of green bonds is to finance projects that promote sustainability and contribute to mitigating climate change. These projects typically fall under categories like renewable energy, energy efficiency, pollution reduction, sustainable agriculture, clean transportation, and waste management. Green bonds function similarly to traditional bonds, where investors lend money to the issuer in exchange for periodic interest payments and the return of the principal amount upon maturity. The advantages of green bonds are twofold. Firstly, they enable issuers to tap into a growing pool of socially responsible investors and diversify their funding sources. Secondly, green bonds encourage sustainable development and help address environmental challenges by directing capital toward projects that contribute to a greener and more sustainable future.

Market Dynamics:

Rising partnerships among key players is estimated to augment the growth of the global green bond market during the forecast period. For instance, the WHO Bank and the International Finance Corporation have partnered up for issuing a green bond in 2020. This partnership has allowed the World Bank in raising more capital for green projects and tap into IFC’s expertise in green finance. Moreover, the limited availability of green projects and the absence of standardization are anticipated to restrain the growth of the global green bond market during the forecast period.

Impact of COVID-19:

The pandemic was first reported in 2019 in China. It was later transmitted to other nations globally. The pandemic also hampered the growth of many sectors. The global economy was ruptured during the pandemic. This outbreak also impacted the growth of other sectors. Manufacturing activities globally were hampered and supply chains were disrupted. This led to hampering trade activities globally. The pandemic led to a decrease in issuing of green bonds during the pandemic. Thus, the pandemic had a negative impact on the growth of the global green bond market. However, the Green Bond Market is estimated to witness growth in the post-pandemic era, owing to the increasing environmental concerns.

Key Takeaways:

The global green bond market is expected to witness high growth, exhibiting CAGR of 10 % over the forecast period, due to increasing investments. For instance, a member of the World Bank Group IFC, Amundi, decided to establish a new fund for mobilizing up to $2 billion in private investment, in November 2021. Tis has been raised for supporting COVID-19 relief efforts and promoting a resilient, green, and inclusive recovery from the outbreak.

North America is anticipated to witness significant growth in the global green bond market during the forecast period, due to growing investments by investors and rising focus on renewable energy.

Key players operating in the global green bond market are Citi Group, HSBC, Crédit Agricole, and BNP Paribas.