The value of outstanding green bonds may almost double this year to as much as $158 billion as the niche product used to fund projects tackling climate change starts to become mainstream.
HSBC Holdings Plc predicts $55 billion to $80 billion green bonds will be issued around the world in 2016, an increase of 32 percent to 91 percent from last year’s level, according to a research note published Tuesday in London. The total outstanding amount will reach $133 billion to $158 billion by the end of 2016, according to the report.
A growing number of countries, including China and India, are producing green bond guidelines, helping to deliver continued growth in the market. Moody’s Corp.’s decision to assess new green bonds will also help to boost the market in the second half of the year, HSBC said. The Paris Accord agreed at the United Nations climate change talks last month along with the success of existing bonds also will drive the market.
Green bond issuance has been gathering pace in recent years. A record $41 billion was raised in 2015 to finance projects that help to reduce carbon emissions, such as renewable energy and energy efficiency schemes, according to data compiled by Bloomberg.
HSBC said it was particularly interested in green bonds that fund climate adaptation, such as flood defenses and likes Nederlandse Waterschapsbank NV 1 percent bond maturing in 2025. The bank also recommended bonds that will finance renewable energy and energy efficiency schemes in countries with high CO2-to-GDP ratios, such as China and India.
HSBC’s prediction of green bond issuance reaching as much as $80 billion this year is more optimistic than Banco Bilbao Vizcaya Argentaria SA, which predicted issuance would reach about $50 billion this year, according to a report dated Jan. 22.