Photo Credit: Axel Antas-Bergkvist via Unsplash

Green Bonds 102: A Brief History of Green Bonds

This is part 2 of a 6-part series on Green Bonds. This series was inspired by numerous conversations that prompted me to create an online compendium on Green Bonds. With the Kenya Bankers Association and other key market stakeholders creating a pipeline for the first green bond in Kenya, it is important to be informed on what green bonds are and their potential role in the Kenya’s sustainable development.


Going Down Memory Lane

2007

  • The first green bond was issued by the European Investment Bank (EIB) in 2007 to finance its climate-related projects which was listed on the Luxembourg Stock Exchange (LuxSE).

2014

2015

  • IFC issued 5 bond in offshore rupee markets (dubbed the first green masala bond) and raised 31.5B rupee for private sector investments to address climate change in India. According to London Stock Exchange, the bond issued under IFC’s USD 3B offshore rupee masala bond program whose proceeds will be invested a green bond issued by Yes Bank, one of India’s largest banks to fund renewables.
  • India had issues a total of USD 1.1B done a number of private sector pioneers (Yes Bank, Export-Import Bank of India, CLP Wind Farms and IDBI Bank). Securities and Exchanges Board of India (SEBI) explicitly mentioned using the Indian green bond market as a key tool to help raise finance need to meet their ambitious intended nationallu determined contributions (NDCs) as stipulated by COP 21.
  • People’s Bank of China (China’s Central Bank) published its Green Financial Bond Guidelines for green bond issuanced by financial institutions. Green Finance Committee of China Society of Banking and Finance(supervised by PBOC) issued Green Bond Endorsed Project Catalogue [2015 Edition] that defined China’s definition of a green bond
  • Total issued labelled green bonds USD 47.8 B with issuance occurring in 14 out of the G20 countries

2016

2017 and Beyond

Source: CBI/HSBC 2016

It is clear from the above chart that there is increased issuance and interest in the green bond market especially as countries see it as an avenue to operationalise their ambitious nationally determined contributions (NDCs) as stipulated under COP 21. Some have dubbed 2017 as the year of sovereign green bonds as France opened the year by bringing to market its first green sovereign bond in January 2017 of EUR 7Bn sale to fund its energy transition. It now holds the record for the longest maturity of 22 years in a nascent bond market. Nigeria hopes to the first African country to issue a sovereign green bond in 2017 of a proposed NGN 20Bn (USD 63Mn) domestic issuance. The country is know to have issued a directive on sustainable banking principles, but the issue of a green bond will not only be a demonstration instrument for other African nations but also back their claim as being fully committed to sustainability matters.

Next: Green Bonds 103:Why Green Bonds as Financing Instruments

Disclaimer: All views expressed here do not necessarily reflect the opinions of my employers or clients, past or present.