The green bonds market in emerging economies reached $52 billion in 2019. The Amundi-IFC report highlighted how this choice can bring long-term stability benefits for investors and issuers.
Green bond issuance continues to increase worldwide and emerging markets are becoming increasingly important players in a growing bond sector. The figure emerges from the second edition of the Amundi-IFC Emerging Market Green Bond Report, produced by Amundi and IFC (World Bank Group) focusing exclusively on green bond investments in emerging markets.
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Coronavirus causes turbulence for investors and issuers
At this stage, issuers and investors are facing the turbulence caused by the COVID-19 crisis and emerging economies have obviously not been spared. However, this crisis is showing greater resilience from green investments than traditional ones.
It will therefore be interesting to see whether, even in the future, investors will consider green issuers to be long-term oriented and flexible to counter short-term volatility.
A future that looks promising for sustainable investment. The IFC estimates a total climate investment potential of $29.4 trillion in emerging market cities until 2030. That is a huge amount of money that will be used to finance projects with environmental and social benefits.
Globally, the positive momentum of green bonds continues to grow. Currently, this market is worth more than $700 billion, with $240 billion in issuance last year alone (3% of total global bonds issued in 2019).
The green bonds market is increasing
According to the Amundi-IFC Emerging Market Green Bond Report, emissions in emerging markets increased by 21% to $52 billion, bringing the total market size to $168 billion. Issues have been driven by greater recognition, both among issuers and investors, of the benefits they generate. That includes stable and predictable returns and greater knowledge of ESG products and strategies.
The growth continues to be driven by China and East Asia and the Pacific region (81% of the market) but other economies have also contributed, among them: India, Chile, Poland, Philippines, United Arab Emirates, and Brazil.
Hard currency issues from financial institutions
As regards the type of emissions, in 2019 about 52% were in hard currency. The most relevant sector for the use of revenues is renewable energy, followed by transport, green buildings, waste, water, biodiversity conservation, and adaptation.
The largest issuers remain financial institutions (59% of the total) followed by non-financial corporations (35%) and sovereigns (12%).
Five challenges for the green bond market in emerging countries
The report also identified the five main challenges that need to be addressed to further facilitate the expansion of the green bond market in emerging countries.
The first concerns the quality and availability of information to identify, measure and monitor green investments. The others are: procurement constraints and limited availability of green-label assets; lack of awareness and know-how about green issuance and investment in green products; overall macroeconomic and political instability; less developed capital markets with insufficient liquidity and high transaction costs.
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First published in yahoo!finanza, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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