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Climate-aligned bond universe stands at USD694 billion outstanding issuance

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The climate-aligned bonds universe now stands at USD694 billion outstanding – a jump of USD96 billion (16 per cent) from the 2015 figure, according to The Climate Bonds Initiative’s fifth annual report ‘Bonds and Climate Change: the State of the Market in 2016’. 

This total is comprised of unlabelled climate-aligned bonds at USD576 billion and labelled green bonds at USD118 billion.
 
The universe is made up of over 3,590 bonds (issued from Jan 2005 to May 2016) from 780 individual issuers across transport, energy, buildings and industry, water, waste and pollution and agriculture and forestry.
 
In the climate-aligned bond universe, the Chinese RMB is the dominant currency (with 35 per cent of the total amount outstanding), followed by the US dollar (24 per cent) and the Euro (16 per cent).
 
Some 78 per cent of the universe is investment grade; the majority of bonds have tenors of 10 years or more; the majority are also government-backed.
 
The USD96 billion increase on 2015 includes USD94 billion in new bonds from existing issuers, plus USD85 billion from new issuers minus USD83 billion of matured bonds and issuers that no longer meet our climate-aligned criteria.
 
Low carbon transport was the largest single sector, accounting for USD464 billion (67 per cent) of the total climate aligned universe, followed by clean energy at USD130 billion (19 per cent).
 
The remaining USD97 billion (14 per cent) is drawn from building and industry, agriculture and forestry, waste and pollution, water or multi-sector bonds.
 
During the research phase of the report, over 1,700 different issuers were analysed to discover those with over 95 per cent of revenue derived from climate-aligned assets. Bonds from these issuers formed the data pool used in compiling the report.
 
The HSBC Climate Change Centre of Excellence commissioned State of the Market 2016, continuing their support from previous years.
 
Zoe Knight, managing director, Climate Change Centre of Excellence, HSBC, says: “The growth in size and depth of both the climate aligned and labelled green bonds is a positive for potential investors looking to lift their green exposure post the COP21 at Paris. It’s a sign of the scale and liquidity in the market and demonstrates the potential for future green investment.
 
“Encouragingly, the report shows that financing low carbon growth paths in the major emerging economies through green bonds has begun and with sound market frameworks, can undergo rapid growth.”
 
Sean Kidney (pictured), Climate Bonds CEO, says: “Bridging the climate finance gap doesn’t require complex new investment models.  The re-alignment of bond market activity with climate change and low emission goals will deliver a stable long term source of green investment. This report shows that the large scale harnessing of bonds and other forms of debt based capital towards climate and carbon goals is within reach.
 
“Green bond based capital to fund infrastructure projects are now an established model. As countries look to turn their INDC commitments into climate plans the report shows that green and climate resilient transport, urban development, water and energy projects are already being financed by green bonds and can be scaled up. The biggest challenge now is for policy makers and investors to develop models that simply accelerate the flow of investment.”

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