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Asia’s Climate Bonds

Nov 1, 2016

The global climate-aligned bonds market is worth $694 billion and China is the largest issuer of the climate bonds in the world, according to data released by the Climate Bonds Initiative, UK.

The Climate Bond Initiative review found total issuance of climate aligned bonds across the Asia Pacific markets. It covered some USD 293 billion market and issuance of green labelled bonds of USD 14 billion.  This was heavily concentrated in China with USD 246 billion and USD 9.2 billion respectively.

China has unveiled an ambitious plan to raise more green bonds for environmental projects. If successful, with an average of $46 billion a year, it would raise as much as the rest of the world combined.

In total, $118 billion of securities were issued that are officially labelled as green bonds -- a fraction of the $694 billion wider market of investments that will rein in pollution and curtail climate change regardless of how they’re classified. The Asia Pacific region has a share of 42% in global climate-aligned bonds and 12% in green labelled bonds. The Climate Bonds Initiative report said that the lower share of green labelled bond issuance in Asia may be due to both a lower level of awareness on behalf of issuers and a lower level of demand from Asia Pacific financial institutions, the report observed.

There’s no generally agreed standard for what constitutes green in finance. The Climate Bonds Initiative, which compiled the report, is drawing up voluntary principles for the industry. Issuance from companies with over 95% of revenues from climate aligned assets, which are specified in a list, counts towards the overall number. The majority of bonds so far have been in mass transport as well as low carbon energy, water, green buildings, agriculture and waste.

The green labelled bonds are mostly issued by companies that are not in climate aligned sectors, but the bond is specifically financing green assets such as energy efficiency, pollution control.

The growth in size and depth of both the climate aligned and labelled green bonds is good news, particularly after the Paris climate summit, where countries agreed to limit global warming to well below two degrees. 

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