Green Bonds Still Have a Long Way to Go to Dent Climate Crisis

For all the money that companies and governments are raising in the green-bond market to fund environmental projects globally, there’s still a long way to go to adequately fund the fight against climate change, according to the Climate Bonds Initiative.

Global sales of green bonds -- the largest category of sustainable debt by dollar volume -- hit a record $513 billion last year, according to data compiled by Bloomberg. Sales could reach fresh highs of between $900 billion and $1 trillion by the end of this year and up to $5 trillion by 2025, the London-based Climate Bonds Initiative estimates.

Borrowers around the world, nonetheless, will have to raise even more money to tackle climate change, with a recent analysis from McKinsey & Co. estimating $9.2 trillion a year annually through 2050 in investment needed to reach net zero. There’s a need to shift more capital to greener initiatives -- in addition to raising new debt -- to achieve the trillions of dollars needed, according to Sean Kidney, chief executive officer of the non-profit CBI.

“In the green bond market, a lot of which is financing or rethinking what we do, we need to be getting to $5 trillion a year to be making a reasonable contribution,” Kidney said in a Zoom interview Tuesday.

Robust Pipeline

The CBI’s supply projections are based on the continued acceleration of green issuance, strong investor demand that’s expected to spur more debt linked to environmental, social and governance projects -- shorthanded as ESG -- as well discussions with the underwriters for the bonds, Kidney said. He expects more corporations to bring new deals and the Chinese market to surge by 100% this year.