New markets for green bonds

The guide outlines five essential building blocks for green bond markets: the enabling environment, investors, issuers and project pipeline, governance, and definitions and standards. It emphasizes that while public sector support is often needed initially, a successful market must eventually become self-sustaining, diverse in its environmental objectives, and transparent in its reporting. The document provides practical frameworks for policymakers to assess their market's readiness and offers case studies from China, India, and Nigeria to illustrate effective policy incentives and issuance strategies.

• A successful green bond market is characterized by depth (sufficient issuance size), breadth (diverse issuers and investors), self-sustainability (eventual independence from public support), longevity (repeat issuance), confidence (via ratings and reviews), diversity in environmental objectives, and actual environmental impact.
• Green bonds are primarily used to refinance existing projects during their operational phases rather than construction phases, as risks are lower for the investor base. They typically offer lower interest rates, longer tenors, and larger sizes compared to bank loans.
• The enabling environment for green bonds requires supportive policies, such as environmental standards, taxes (e.g., carbon or landfill taxes), and the inclusion of environmental risk in fiduciary duty, alongside the absence of restrictive regulations on issuers like cities or state-owned companies.
• China significantly grew its green bond market in 2016, reaching 236 billion yuan (US$36.2 billion), which represented 39% of global issuance that year. This was driven by incentives from the People’s Bank of China and the National Development and Reform Commission, including allowing green bonds to serve as collateral for low-interest central bank loans.
• Institutional investors prioritize credit and price, alignment with global standards (specifically the ICMA Green Bond Principles), transparency in governance and project selection, independent verification, and annual impact reporting.
• In new markets, the first issuances typically come from governments, cities, development banks, or large commercial banks. Over time, the market may expand to include high-investment-grade corporates and eventually lower-rated issuers as liquidity and investor comfort increase.
• Market development is often coordinated through committees or councils involving central banks, ministries, and private sector players. Examples include Brazil's Sustainable Market Development Council and Nigeria's Green Bond Private Public Sector Advisory Group (GB-PPSAG).
• There are four primary channels for verifying the green credentials of bonds: second opinions from environmental specialists, rating agency assessments (such as Moody’s GB1-GB5 scale), certification against the Climate Bonds Standard, and post-issuance verification or assurance of fund management.
• The Exim Bank of India issued a US$500 million dollar-denominated green bond in March 2015, which was oversubscribed 3.2 times. Participation was led by fund managers (58%), followed by banks (20%) and sovereign wealth funds or insurance companies (18%).

APA

Williams, J., Jones, A., & Pickin, S. (2017). New markets for green bonds. Climate and Development Knowledge Network. https://cdkn.org/sites/default/files/files/Green_bonds_new_markets_guide_final_web-res.pdf

Chicago

Williams, Jon, Andy Jones, and Sarah Pickin. New markets for green bonds. Climate and Development Knowledge Network, 2017. https://cdkn.org/sites/default/files/files/Green_bonds_new_markets_guide_final_web-res.pdf.

Wikipedia

{{cite report |last1=Williams |first1=Jon |last2=Jones |first2=Andy |last3=Pickin |first3=Sarah |title=New markets for green bonds |publisher=Climate and Development Knowledge Network |date=July 2017 |url=https://cdkn.org/sites/default/files/files/Green_bonds_new_markets_guide_final_web-res.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{williams2017new, author = {Williams, Jon and Jones, Andy and Pickin, Sarah}, title = {{New markets for green bonds}}, institution = {Climate and Development Knowledge Network}, year = {2017}, month = jul, url = {https://cdkn.org/sites/default/files/files/Green_bonds_new_markets_guide_final_web-res.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }