Enhancing green bond issuances in developing economies

The report examines the growth of green bonds in emerging markets, identifying critical success factors such as sound regulatory frameworks, investor demand, public sector participation, and macroeconomic stability. It details barriers including underdeveloped capital markets, a lack of bankable projects, and the risk of greenwashing. The document provides a five-step issuance process and analyzes the roles of development banks and national governments in catalyzing markets. Case studies on India and Kenya illustrate different stages of market readiness, from a corporate-led leader (India) to a nascent market (Kenya), offering tailored policy advice to enhance sustainable finance flows.

• Four critical factors are essential for green bond market development in developing and emerging economies: a sound policy and regulatory environment aligned with international standards, investor demand for sustainable finance instruments, public sector participation and collaboration, and stable macroeconomic and political conditions.
• Emerging markets account for approximately 20% of global green bond issuance, with leadership typically following either a corporate-led route (e.g., India and Brazil) or a government-led route (e.g., Chile and Indonesia).
• Underdeveloped capital markets in emerging economies can be addressed through credit guarantees, hard currency denomination to access global liquidity, or private placements to test structures and reduce administrative burdens.
• A significant barrier to market growth is the lack of a bankable project pipeline, particularly for climate adaptation projects which often suffer from low commercial viability and measurement challenges.
• Green labelling adds costs, estimated at 0.3 to 0.6 basis points for a typical US$ 500 million bond, which may deter issuers unless offset by a 'greenium' (pricing benefit) or government subsidies.
• Development banks act as catalysts by serving as landmark issuers, providing credit enhancements, and offering technical assistance to bridge capacity gaps in emerging markets.
• Greenwashing risks are heightened by fragmented definitions and standards; the report recommends the use of credible national taxonomies and external reviews to maintain market integrity.
• In India, the green bond market is characterized by a strong corporate presence, with 90% of volume in 2021 coming from corporates, though it lacks a formal national taxonomy.
• Kenya's green bond market is in a nascent stage, with only one corporate issuance by Acorn Holdings Limited as of September 2022, despite a strong policy framework.

APA

Pillay, K., Sager, M., Hazell, D., & Rabinowitz, L. (2022). Enhancing green bond issuances in developing economies. Climate and Development Knowledge Network. https://cdkn.org/sites/default/files/2022-11/CDKN_Enhancing%20Green%20Bond%20Issuances_WEB.pdf

Chicago

Pillay, Kamleshan, Megan Sager, David Hazell, and Lara Rabinowitz. Enhancing green bond issuances in developing economies. Climate and Development Knowledge Network, 2022. https://cdkn.org/sites/default/files/2022-11/CDKN_Enhancing%20Green%20Bond%20Issuances_WEB.pdf.

Wikipedia

{{cite report |last1=Pillay |first1=Kamleshan |last2=Sager |first2=Megan |last3=Hazell |first3=David |last4=Rabinowitz |first4=Lara |title=Enhancing green bond issuances in developing economies |publisher=Climate and Development Knowledge Network |date=November 2022 |url=https://cdkn.org/sites/default/files/2022-11/CDKN_Enhancing%20Green%20Bond%20Issuances_WEB.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{pillay2022enhancing, author = {Pillay, Kamleshan and Sager, Megan and Hazell, David and Rabinowitz, Lara}, title = {{Enhancing green bond issuances in developing economies}}, institution = {Climate and Development Knowledge Network}, year = {2022}, month = nov, url = {https://cdkn.org/sites/default/files/2022-11/CDKN_Enhancing%20Green%20Bond%20Issuances_WEB.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }