CRAs Issue Conflicting Green Bond Forecasts

    NordSIP (Stockholm) – Moody’s Investors Service estimates that the global green bonds issuance will grow by 20% in 2019 to reach a total value of US$ 200 billion, according to a report it released on January 31. This assessment contrasts with the forecast by S&P Ratings, which on January 29 reported a more modest growth forecast of 8% to US$ 180 billion from 2018’s US$ 167 billion.

    According to Moody’s report, the growth is expected to come from a range of causes. From the business community, continued unmatched demand from investors, roll-over of the existing stock of green bonds, and growing diversification of issuers, including increased participation by US non-financial corporates, should be a powerful contributor to this growth.

    Support is also expected to come from the public sector, as increased governmental commitments to address climate change is may push governments to issue green bonds to fund environmental projects. Finally, the development of clearer green bond standards and definitions globally should help investors and borrowers identify which projects qualify as “green”.

    Finally, the increased adoption of the UN Sustainable Development Goals, should align investments with long-term environmental and social objectives and grow the pipeline of sustainable investment products globally.

    “After a slow 2018, green bond issuance will grow more rapidly in the year ahead. We continue to see a number of factors supporting the long-term growth of the sector, including more active participation from US non-financial corporates,” says Matthew Kuchtyak, a green bonds analyst at Moody’s and the lead author of the report.

    The more bearish outlook from S&P Ratings reflects concerns that increases in central bank policy rates are “triggering a shift in the credit cycle” and contributed to a 3% to 4% decline in global absolute fixed-income issuance in 2018. The 2017 reform of the US tax code also coincided with a decrease in green bond issuance by US municipalities. While most of the market is dominated by China, SP growth to continue to come from Western Europe.


    The full report from Moody’s can be read here.

    The S&P Global Ratings’ note can be found here.

    Picture © Shutterstock

    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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