UniCredit anticipates another record year for green bonds
- Green bond issuance should reach a total of USD 130 billion in 2018
- A 9 percent increase compared to 2017's record issuance volume of USD 119 billion
- Biggest issuer groups are private banks as well as other private sector companies, with each around 25 percent of total issuance
- Green sovereign bonds to continue gaining significance in 2018
UniCredit is anticipating yet another record year for green bonds in 2018. According to the Bank's figures, the total issuance volume should reach USD 130 billion in 2018 – a 9 percent increase compared to 2017's record issuance volume of USD 119 billion. UniCredit again expects a very substantial share of green bond placements to originate in Europe. European issuers were a dominant force in the market in 2017, with 49 percent of total issuance, followed by Asia, especially driven by China, with 27 percent, and North America (13 percent).
"We are seeing an uninterrupted upward trend in green bonds and expect the strong growth in issuance activity to continue. Through the increasing diversity of issuers, the market is maturing and has gained a broader foundation," said Antonio Keglevich, Head of Green Bond Origination at UniCredit.
"At the same time, investors are increasingly seeking out sustainable assets. The fact that more than one in four dollars worldwide is now being invested on the basis of sustainability criteria is also adding impetus to the market."
With regard to issuer classes, private banks as well as other private sector companies have developed into the most important market participants, with each group accounting for around a quarter of all green bond issuance. In October 2017, for example, the German energy company Innogy issued the first German benchmark green bond exceeding EUR 850 million. One of the biggest German green bonds in 2018 – worth EUR 275 million – was also issued by a private sector company: German wind turbine manufacturer Nordex. Now more than ever, companies are striving to address climate change through climate-friendly production methods, clean energy production and the promotion of biodiversity. This generally requires investments and, increasingly, ever-larger amounts of private capital.
By issuing a green bond, companies not only signal their commitment to green issues and ecology by financing projects with clear environmental benefits; "It is also evident that, by issuing green bonds, companies diversify their investor base, which can lead to higher demand. Green bonds are often more heavily oversubscribed than conventional placements. This may in turn be reflected in lower new issuance premiums for a company," explains Keglevich.
Sovereign issues in the green bond segment are providing an avid boost to the market. After the first-ever issue of a sovereign green bond by Poland in 2016, followed the next year by France, sovereign issuers have continued to play an increasing role in the green bond market bonds in the current year, with new bonds placed by Poland and Belgium in February 2018 .
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