- The market for green bonds – money invested in sustainable projects – is growing exponentially.
- In 2020, $270 billion was spent on green bond issuances, according to the World Economic Forum’s report, Fostering Effective Energy Transition 2023.
- Efforts are accelerating to prevent misleading marketing known as greenwashing.
Tackling the climate crisis won’t come cheap. The United Nations’ Intergovernmental Panel on Climate Change estimates that limiting the temperature increase to 1.5°C, the goal of the Paris Agreement, will require over $3-6 trillion of investment every year to 2050.
To raise those vast sums, governments and corporations are increasingly turning to green bonds.
What is a green bond?
Green bonds work like regular bonds with one key difference: the money raised from investors is used exclusively to finance projects that have a positive environmental impact, such as renewable energy and green buildings.
With countries around the world stepping up their efforts to reduce carbon emissions, the market for green bonds is booming. This rapid growth was first highlighted in October 2021, when the European Union (EU) issued about $14 billion of the bonds – the largest deal ever at that time.
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How big is the green bond market?
The first green bonds were issued in 2007. The market grew slowly for nearly a decade, but then it started to take off. Global green initiatives such as the Paris Agreement on climate change and the UN Sustainable Development Goals have helped spur this expansion.