The Bonds & Climate Change: State of the Market 2016 report which was published last week by the Climate Bonds Initiative (CBI) shows that the global climate bonds market has grown significantly since the Paris Agreement in December.
The report shows there was a 16% increase in climate bonds issuance compared to 2014 as the bonds reached US$694 billion last year.
The market is expected to continue to grow following the signing of the Paris Agreement in December when 195 countries agreed a deal to curb carbon emissions and prevent dangerous levels of global warming.
According to the CBI, the market is comprised of 3,590 bonds from 780 issuers, mainly focused on low carbon transport and renewable energy.
Organisations, companies and financial bodies, have committed to new climate targets during COP21 and institutional investors have highly contributed to the growth of the climate bond market. The insurance industry as well, has set a target of multiplying its climate smart investments by 10 by 2020.
Climate-aligned investments and green bonds have raised interest from major finance organisations such as the Bank of England’s Prudential Regulation Authority and signatories to the United Nation’s Principles for Responsible Investment – which includes 1,525 signatories representing $60 trillion of funds under management.
Green bonds play a huge role as they are used to invest in projects that will help tackle climate change and reduce emissions.
As stakeholders observed, the report shows that the large scale harnessing of bonds and other forms of debt based capital towards climate and carbon goals is within reach and this will deliver a stable source of green investment, in the long run.