A $100 Billion Appetite For Green Bonds?

This year the global green bonds market could top $100bn. That’s an awful lot of money, and an awful lot of potential investment in renewables projects including wind farms.

The prediction comes from ratings firm Standard & Poor’s, which forecast that companies could issue $30bn of green bonds this year of a total of $100bn. This is significant growth from the $19bn issued by companies in 2014 from a total market just shy of $37bn.

Now, there are a few main types of green bonds, as explained here by the Climate Bonds Initiative. But however they are structured, the idea is that all will lead to more investment going into green energy projects and companies. This includes those in the wind sector.

We can see a couple of main benefits of this increased appetite for green bonds.

The first is that it should enable companies in the wind sector to raise external investment to support their general corporate goals. Vestas is seeking to take advantage of this and it issued a seven-year €500m bond in March for just this purpose. This is the first corporate green bond issued by a company dedicated exclusively to wind energy.

The second potential benefit is more funding for the sector should enable developers to offload existing wind farms —or stakes in them —that they can reinvest in new projects.

The potential benefits of green bonds for the wind sector look clear. The only problem is that the Standard & Poor’s projection of threefold growth is not guaranteed to happen.

It relies on Chinese companies and public authorities piling into green bonds, which in turn depends on the Chinese government pushing laws to encourage them to cut pollution.

This growth also relies on how new standards for green bonds are introduced. It is widely accepted that those issuing green bonds need to comply with standards over how these funds are being used, and whether the projects they are investing in are truly ‘green’.

Clumsy application of new rules or lacklustre interest from China could both make big dents in that $100bn. For the sake of wind, we hope neither of these happens.