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ESG Trends 2021: Rise of Green Finance
– Green bond issuance is expected to reach an all-time high of $500bn this year
– Demand for social, sustainability and blue bonds has also grown in 2021
– COP26 has helped facilitate increased funding for emerging markets
– Efforts are being directed towards creating universal sustainable finance guidelines
In a year in which significant political efforts have been made to speed up the energy transition, 2021 has also been record-breaking for green finance, as governments, international institutions and lenders alike seek to support the shift towards renewables.
Mirroring developments that are expected to see new renewable energy generation capacity reach an all-time annual high of 290 GW this year, the issuance of green bonds – financial instruments that fund environmentally sustainable projects – is forecast to reach a record-breaking level of $500bn this year, according to the Climate Bonds Initiative (CBI). This is a 46% increase on last year’s figure of $270bn, which itself was an all-time record.
Emblematic of the increased appetite for sustainable finance was the EU’s $14bn issuance of green bonds in October, the largest ever of its kind. 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.
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