SNW Impact Insight: An Apple in the Green Bond Orchard

Apple Inc. brought their second green bond offering to market this month, raising $1 billion from investors through the issuance of these 10 year notes. The proceeds of this bond issue are earmarked for various energy efficiency and renewable energy projects, sustainability initiatives, and other green undertakings. The company's first foray into the green bond market was in 2016 when they raised $1.5 billion, the largest green bond issued by a U.S. company to date. Of the funds raised in 2016, $442 million were allocated to sixteen projects by the year’s end, ranging from recycling to renewable energy

Since their introduction in 2007 green bonds have steadily been attracting attention from both issuers and investors. Over the past three years this interest has led to an accelerating growth rate which is expected to continue in 2017, with projections indicating that this will be a record year for the issuance of green bonds. On a year to date basis, the Climate Bonds Initiative reports that the total global issuance of green bonds has already exceeded $49 billion. Moody’s projects that total issuance in 2017 will exceed $206 billion, a much more positive outlook for the market than Bloomberg New Energy Finance which projects growth to $123 billion this year. In comparison, the total issuance in 2016 was $93 billion with green bond issuances in the Chinese market representing roughly a third of the total issuance.

Last year saw significant developments in the green bond market with the first sovereign bond being issued by Poland, the introduction of covered bonds in the Chinese market, and the mortgage-backed bonds being marketed in the Netherlands. This year, France has already brought a green bond to market and two green bond exchange-traded funds have been introduced, both events marking positive signs for the growth of the market and associated investment products. In the U.S. the municipal green bond market has seen positive growth with over $3.8 billion in such bonds being issued through the end of May, more than $1 billion more than during the same time period in 2016. Given the widespread commitment to the continued support of ambitious emissions reductions programs by states and cities in response to President Trump’s actions regarding the Paris Agreement, it is expected that there will be continued growth in the municipal green bond market.

Self-labelled green bonds are typically issued under the frameworks developed and promoted by either the Green Bonds Principles, a component of the ICMA, or the Climate Bonds Initiative. The Green Bonds Principles members approved an update to the organization's governing structure last week in Paris, reiterating the Principles' mandate and setting separate standards for Social Bonds and introducing the concept of Sustainability Bonds, as well as clarifying the governance structure for the body. Updated standards were released in conjunction with the organization’s 3rd Annual General Meeting & Conference and can be found on the GBP website here.

Source: Reuters, ICMA – Green Bond Principles, Bloomberg New Energy Finance, Moody’s, Climate Bonds Initiative