Since 2011, annual global energy transition investment has almost doubled, from $290b to $501b.
A 2020 report co-authored by Amundi and the IFC pointed out that investment flows since the start of the COVID-19 crisis have proven more resilient towards green investments when compared to their traditional counterparts.
Amidst this success however, there must be an acknowledgment that emerging economies will likely be disproportionally hit by the crisis as their governments cannot always provide fiscal and monetary stimulus, and many are heavily affected by the price declines in energy and raw materials, reductions in trade, tourism, and also remittances.
The global green bond market is a crucial source of financing for positive environmental projects and enables investors to direct funding towards environmentally-friendly activities with a comparable risk-return profile to traditional bonds, in both developed and emerging nations.
Demand for green bonds in emerging markets rose by 21% to $52bn .
Financial institutions are the largest issuing sector in emerging markets, making up 59% of issuances, compared with 19% in developed markets, followed by non-financial corporates at 35%, sovereigns at 12%, government agencies at 5% and municipals at 0.1%.
Clearly there is positive growth, as both issuers and investors are becoming more comfortable with and recognising the benefits including stable and predictable returns, and a greater awareness of environmental, social and governance products and strategies.
A report published by London’s Imperial College Business School in March 2021 argued that there is too much emphasis on developed-market standards to define emerging market bond rules.
Indeed, what green means varies depending on context.
It is a green bond investment fund that uses public and private capital to help businesses in developing countries transition to cleaner, more efficient energy use and invest in other climate-friendly solutions and has already raised nearly $500 million.
As always, education will be vital.
Whilst a lot has been achieved, there is still a long way to go and all possible routes should be explored to help us reach the 1.5-degree scenario.
Through technical interviews to Q&As delving into industry trends and thought pieces, Sarah sheds light on some of the ways in which the international finance community can collaborate to mobilise capital to sustainable activities.