Green bonds set to gain strength in 2020 following record year

  • China, USA, France and Germany dominated the green bonds market in 2019, accounting for over 40% of all proceeds globally but Sweden is crowned green bonds ‘hotspot’
  • Record 479 issuances worldwide in 2019, compared to 382 in the year before
  • 2020 set to be a ‘bumper’ year for green bonds, driven by new set of standards in Europe and increased activity across Asia

Last year saw a record number of issuances for green bonds as companies, financial institutions and governments raised a total of US$185 billion to fund environmentally sustainable projects, according to data analysed by global law firm Linklaters.

Richard O’Callaghan Capital Markets partner at Linklaters commented:

“This has been the strongest year yet for green bonds, demonstrating record investor appetite for sustainable investments. 2020 is set to be a bumper year for green bonds around the world as environmental impact becomes an even greater priority for investors and asset managers.”

Green bonds finance environmentally-friendly projects, including energy efficiency, pollution prevention, clean transportation and new green technologies.

Amrita Ahluwalia, Capital Markets lawyer commented:

“Since first appearing in 2007, the market for green bonds has attracted significant interest in recent years as sustainability issues rise up the corporate agenda, following pressure for companies to reduce their environmental impact, and following the introduction of increased regulation in the area. 2019 saw a total of 479 green bonds issues worldwide, up by a quarter compared to the previous year.”
Sweden was 2019’s ‘green bonds hotspot’

Just over 40% of all issuances originated from China, USA, France and Germany. However, Sweden came top of the leaderboard with a total number of issuances of 78 in total in 2019 and over 230 since 2015.

With high levels of climate awareness in Swedish society, the country’s local government agencies fuelled the high level of issuances on account of the substantial investments being made in green infrastructure as part of Sweden’s ambition to become one of the first fossil-free welfare countries.

2020 to see continued momentum in Europe and Asia

Spurred on by the EU’s newly agreed set of guidelines on what counts as a sustainable investment, Linklaters expects to see further growth in the European green bonds market in the next 12 months. Following intense negotiations last month, the EU Taxonomy Regulation received the backing of member states taking the bloc a step closer to a common classification system of environmentally-sustainable activities. Whilst not expected to be implemented until 2021, it is hoped that the new rules will curb the practice of “greenwashing” - making misleading claims about environmental benefits to lure ethically-minded investors.

With US$15.4 billion of the green bonds having been issued by Chinese issuers in 2019, Asian markets accounted for just under a quarter of the global market for green bonds. Investors across Asia are expected to start turning their attention to green bonds in the year ahead in an attempt to keep pace with more established markets, as awareness around environmental issues grows.

Top 10 countries by green bonds proceeds sold, Source: Refinitiv (formerly Thomson Reuters)

green bond table

Green bonds global issuances, 2015 to 2019, Source: Refinitiv (formerly Thomson Reuters)

Green bonds chart