Green bonds are becoming increasingly popular as the world looks to recover from COVID-19. Hoping to recover from the pandemic, governments, corporations and the financial community are keenly supporting sustainable and environmentally friendly initiatives.
In the first semester of 2021, the issuance of green, social, sustainable and sustainability-linked bonds doubled and even tripled in some cases, compared to the same period last year. Bloomberg Green found that the value of green bonds issued in the first six months of 2021 exceeded that for the whole of 2020, at $248.1 billion.
Sustainability bonds, issued to finance or refinance green and social projects, have surged from $71 billion in 2020 to $90.4 billion in the first half of 2021.
Sustainability-linked bonds are also growing, though less commonly. These set specific sustainability performance targets that increase the bond interest due if the beneficiary does not meet them. So far this year, $40 billion have been issued, compared to $9 billion in the same period last year, the FT reports.
Social bonds, meant to raise money to promote positive social outcomes, tripled in value this year compared to the first half of 2020, according to the FT.
Europe is leading the green bonds, and this is excluding the NextGenerationEU stimulus package, which will issue around $297 billion of green bonds from mid-2021 to 2027.
Meanwhile, China accounted for 13.2% of the green bond market, and the U.S. made up 12.8%. Germany alone, followed with a 12.2% market share and France with 10.9%.
It appears it will continue, as governments and corporations further sharpen their focus on a sustainable recovery, and investor demand continues to be strong.
Bank of America seems to have increased its green and social bond issuance to $900 billion from $750 billion, while the Institute of International Finance is expecting sustainable debt to exceed $1 trillion this year.
However, several factors such as stimulus packages and policy initiatives at both supranational and local levels will play a role in sustaining the growth of the sustainable finance sector.