More than 60% of those tapping this market for cash are governments and their related agencies, according to last year’s Bloomberg Barclays MSCI Global Green Bond Index.
This is double the number of corporate issuers (31.3%). Utilities and financial companies are particularly active in the private market. Indeed, Lloyds Bank raised ￡250m in 2014 to lend to clean energy companies. Growth in the past few years has been driven by corporates such as Lloyds. Expanding the number of private issuers will be crucial to green bonds increasing their share of the global debt market.
Manuel points to there being almost no corporate issuance around five years ago. He believes that future growth will be driven by corporates. “It looks like corporates are picking up the baton in terms of issuing these green bonds,” he adds.
WHEN GREEN ISN’T GREEN
“Not all green bonds are the same and not all green bonds are really green,” Manuel says, explaining why he believes the market will struggle to attract new investors.
“Every bond is different and the reason why each bond is being issued really does vary, so it is important to get into the detail [of an issuance],” he adds.
This is a nod towards there being different standards by which green bonds can be measured and assessed by investors. “For me, I want to be able to compare and contrast one green bond with another, but it is difficult,” Freedman says.
This makes it a challenge to pin down an accurate picture of the market. Moody’s puts the size of green bond issuance in 2017 at $155.5bn (£112.9bn), while Linklaters valued the market at $107.4bn (£78.2bn) for the same year.
There are frameworks such as the Green Bond Principles and the Climate Bonds Initiative, but as voluntary codes they do not provide the certainty that investors need to consider gaining exposure to the asset class.
“Even if you use the same green bond principles, there have been various iterations over time, so what you might have used three years ago could be different today,” Freedman says. “Different companies may use different methods to assess how they have reduced greenhouse gas emissions, which can create challenges in terms of comparing the data.”
The confusion caused by the lack of a universal standard means that many issuers are allowed to control the marketing of their own offering. “The big challenge in this market is often that the green label is self-labelled,” Manuel says.