Mumbai: Global green bond issuance slowed during the first quarter of 2018 compared to the first quarter of last year, mirroring issuance trends in the broader market against a backdrop of rising interest rates, said a report by Moody’s Investors Service on Tuesday.

In the first three months of 2018, green bonds worth $30.4 billion were issued globally, representing an 11.5% year-over-year decline. Green bonds are similar to conventional bonds but with the unique characteristic that they raise capital for projects that have environmental benefits.

“While first-quarter volumes suggest a slower pace of market growth, broader fixed income market conditions may have contributed to the decline in green bond issuance," said Matthew Kuchtyak, an analyst at Moody’s.

Most sectors globally saw a material decline in overall bond issuance during the first quarter of 2018, he added.

Issuance during the January-March period was close to half of what would have been needed to achieve the target set by Moody’s for 2018. Moody’s has forecast $250 billion of total green bond issuance globally in 2018.

Graphic: Subrata Jana/Mint
Graphic: Subrata Jana/Mint

“Despite the dip, a number of developments point to a strong second quarter, underscoring Moody’s expectation of the green bond market’s continued maturation," said the report. The second quarter of the current calendar year has started off on a good note with a few significant issuances in April, Moody’s noted.

These include a €1.1 billion issuance from the government of France, a €750 million issuance from ABN AMRO Bank N.V. and €500 million issuances from Berlin Hyp AG and BNP Paribas. The first quarter witnessed the continued emergence of sovereign green bond issuance, Moody’s said.

Although only three sovereign deals came to market, the size of the transactions propelled sovereign issuers into the leading position in the sector, according to the report.

Sovereign issuance was bolstered by a debut green bond worth €4.5 billion ($5.5 billion) by the government of Belgium. The transaction represented the second largest sovereign green bond till date, only behind France’s maiden green bond in 2017. Besides Belgium, the government of Poland brought its second green bond worth €1 billion to market and the government of Indonesia issued the first sovereign green sukuk (Islamic bonds) for $1.25 billion.

According to Moody’s, the market has seen several positive developments related to the green and sustainable bond sectors, including the launch of the ‘Green Bond Pledge’ initiative, the announcement of green bond guidelines in Peru and the launch of the ‘Sustainable Blue Economy Finance Principles’.

In addition, multilateral agencies continue to support green bond issuance in emerging markets, Moody’s said.

“These new developments indicate that the slower-than-anticipated first quarter green bond issuance will represent no more than a minor speed bump on the way to global market growth," said Kuchtyak.

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