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Regulatory uncertainty will hold back green bonds

Tuesday, May 12, 2015

Subject

The outlook for green bond financial instruments.

Significance

Issuance of 'green bonds' -- designed to help fund climate-friendly projects -- is rising, with more than 11 billion dollars raised in 2015, according to the Climate Bonds Initiative, an NGO that tracks such investments. The International Capital Markets Association (ICMA) in March issued voluntary green-bond standards to improve disclosure and transparency.

Impacts

  • Green-bond new issuance this year is on track to exceed 2014's 36.5 billion dollars.
  • Investors are concerned that a lack of government regulation might lead to 'greenwashing' and other abuses by issuers.
  • Investor interest in green bond offerings is strong, with oversubscription of green issuances expected to continue.
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