ESG Trends 2021: Rise of Green Finance | [term:name] 2021 Oxford Business GroupESG Trends 2021: Rise of Green Finance | [term:name] 2021 Oxford Business GroupESG Trends 2021: Rise of Green Finance | [term:name] 2021 Oxford Business Group
Impact Investing Forum 2022
London. April 28-29, 2022.
According to the Climate Bonds Initiative, green bond issuance is expected at an all-time high $500bn in 2019.- Increased demand for blue, sustainability, and social bonds in 2021.- COP26 has helped increase funding for emerging markets. Efforts are being made towards creating universal sustainable finance guidelines. This represents a 46% increase over last year’s $270bn figure. The money raised will be distributed among member states, to be used for clean energy projects and developments that help governments achieve carbon neutrality by 2050.While Europe is a leader in the issuance of green bonds, a number of emerging markets have also made significant progress on this front.For example, in April Saudi tourism project developer The Red Sea Development Company secured a SR14.1bn ($3.8bn) green bond from four Saudi banks, with the funds to go towards building 16 renewable energy-powered hotels across the country.Meanwhile, in a sign of the green potential of Islamic finance, in June Indonesia raised a $3bn sovereign sukuk (Islamic bond) that will help fund sustainable development projects.Highlighting the potential future growth of the segment, the CBI predicts that green bond issuances will crack the $1trn mark in 2023.Social, sustainability and blue financeAlthough green bonds are the most prominent form of climate-focused finance, the development and expansion of a number of other innovative financial instruments has also supported the shift towards decarbonisation.For example, social bonds – which raise money for projects with positive social outcomes – and sustainability bonds – a mix of green and social bonds – have grown dramatically over the past two years on the back of attempts to build a sustainable platform for post-coronavirus economic growth.Elsewhere, blue bonds have also gained traction throughout 2021, even while they account for a considerably smaller portion of market share.Similar in their function to green bonds, blue bonds are debt instruments issued to support investment in marine-friendly initiatives and the blue economy.Following the launch of the world’s first sovereign blue bond in 2018, when the Seychelles raised $15m from international investors to help fund the expansion of marine areas and improved governance of the fisheries industry, a number of institutions have since launched their own. The Asian Development Bank (ADB), for example, issued its first ever blue bonds in September. This $151m, 15-year bond will be used to finance ocean-related projects in Asia, the Pacific, and other countries. Transition bonds, a relatively new type of debt instrument, are used to finance a company’s shift towards lower carbon emissions or reduced environmental impact. These bonds are a relatively new type of debt instrument and are used to fund a company’s transition to lower carbon emissions or less environmental impact. It joins other major lenders such as Citibank who announced in April that it would cease financing thermal coal mining. This is a clear example of how large financial institutions can play an important role in the transition to low-carbon energy. Similar to the previous example, the insurance industry can play a significant role in the shift towards carbonisation. In July, eight of the largest insurance companies and reinsurers in the world – AXA and Allianz, Aviva and Generali – announced that they would no longer finance or insure any new thermal coal mining projects. They also stated that they would stop financing or underwriting oil exploration and production until 2025.
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