The Green Bond market is estimated to be valued at US$ 479.60 billion in 2023 and is expected to exhibit a CAGR of 10% over the forecast period 2023 to 2030, as highlighted in a new report published by Coherent Market Insights.
Market Overview:
Green bonds are fixed-income instruments designed to support climate-friendly and environmentally sustainable projects. They are typically issued by corporations, development banks, and governments to raise capital for climate and environmental initiatives. Key sectors financed through green bonds include renewable energy, energy efficiency, pollution prevention, sustainable forestry, and low carbon transport.
Market Dynamics:
Increased environmental investments: Governments and corporations across the globe have significantly increased investments in renewable energy, green infrastructure, and sustainability initiatives in recent years. This is driving strong demand for green bonds to tap large pools of environmental capital. For example, Japan aims to invest over $190 billion in green projects by 2030 under its Green Growth Strategy.
Stringent government regulations: Stringent environmental regulations in major economies like the EU and China have put pressure on industries and cities to lower carbon emissions and adopt greener practices. Green bonds provide an effective funding avenue to finance transition towards cleaner technologies and help meet ambitious climate targets. For instance, the EU’s Green Deal regulations will require over $270 billion annual investments in clean infrastructure by 2030.
SWOT Analysis
Strength: The Green Bond Market Growth has witnessed significant growth over the past few years owing to increasing investor demand for environment-friendly investment options. Several governments and regulatory bodies are promoting initiatives to fund green projects through green bonds. Large corporates and financial institutions have demonstrated strong commitment towards raising capital through green bonds.
Weakness: Lack of a globally accepted framework for defining ‘green’ projects creates ambiguity around what exactly qualifies as a ‘green’ project. Verification and certification of funded projects as truly ‘green’ requires extensive diligence and ongoing monitoring which increases issuance and compliance costs.
Opportunity: Growing global focus on combating climate change and transitioning to renewable sources of energy presents massive opportunities to channel larger investments towards eligible green projects. Emerging markets and developing nations across Asia and Africa offer substantial potential for channeling investments through issuance of green bonds to support infrastructure and development goals.
Threats: Stringent screening processes and verification standards may limit the number of qualifying projects in some regions or sectors. Economic uncertainties and decline in risk appetite during downturns can negatively impact demand and funding for green bonds even if underlying projects are viable.
Key Takeaways
The global green bond market is expected to witness high growth, exhibiting a CAGR of 10% over the forecast period, due to increasing investments towards transitioning to cleaner sources of energy and delivering on climate targets.
Regional analysis: The US and European markets currently dominate green bond issuances, collectively accounting for over 60% of the global market in 2023. However, China has emerged as the fastest growing market for green bonds in recent years supported by strong policy thrust. Several Asian and African markets offer promising growth opportunities going forward to channel investments into renewable projects.
Key players: Key players operating in the green bond market are Bank of China, China Development Bank, European Investment Bank, Natixis, Societe Generale, Iberdrola, Banco Santander, Abu Dhabi Islamic Bank, KfW, BNP Paribas, UniCredit, Credit Agricole, DBS Bank, Standard Chartered, NatWest Group. These financial institutions and corporates have demonstrated leadership in pioneering large green bond issuances to fund renewable energy and other environment-friendly projects.
*Note:
1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it