Green Bonds Booming Amid Pandemic Rush To Fix The Climate Crisis

A critical role could be played by green bonds in the recovery of the global economy from the impact of the novel coronavirus pandemic.

In recent months, there has been an increase in interest in green bonds with investors trying to find out securities that can generate returns and be helpful for the environment at the same time. In order to help meet ambitious climate goals, governments are offering green bonds and those are being used by companies to help them reduce the impact of their business on the environment.

Being similar to the traditional fixed income securities, the money generated from green bonds however have to be spent on climate, environment or renewable energy products only. Such bonds were first floated at the Wall Street in 2007. However the current pandemic has helped to increase interest of investors in them.

The coronavirus recovery plans of governments around the world now also have environmental projects and these projects need financing for which huge amounts of new debt need to be taken on. On the other hand, companies are being forced to intensify their focus on tackling societal and environmental issues because of the upheaval caused by the pandemic.

“While financings related to pandemic response efforts will subside as the worst of the crisis fades, an enduring focus on environmental and social issues will continue to prompt public and private sector issuers alike to consider issuing debt instruments tied to specific sustainable projects,” Moody’s Investors Service said in an August report.

According to research company BloombergNEF, here has been a surge of 12 per cent year on year in the value of green bonds issued in the first nine months of 2020 at more than $200 billion.

According to James Tanner, an associate at law firm Baker McKenzie, green bonds are the perfect tool that can help the global economy to recover in a sustainable way.

“The Covid crisis has given the world a unique pause button moment,” he said. “Investors around the world … have indicated that in the restart their focus will be on investing in a sustainable fashion.”

Among the most recent adopters are the European Union and Volkswagen.

The money generated from issuance of green bonds would account for 30 per cent of the European Union’s €750 billion ($882 billion) coronavirus recovery package, European Commission President Ursula Von der Leyen announced in September.

In the same month, its first green bonds were offered by Volkswagen which helped the car maker to raise €2 billion ($2.4 billion) which the company plans to expend on the development of its new platform for electric vehicles and two new models.

The carmaker plans to issue more green bonds in the future, said the company’s Chief financial officer Frank Witter in a statement. “With the issuance of our first green bonds, we are giving investors the opportunity to make sustainable investments in the future of e-mobility. It is a strategic milestone in our financing strategy,” he said.

“The pandemic will intensify the focus of companies, investors and other stakeholders on [environmental, social and governance] factors,” Moody’s said in its report.

(Adapted from CNN.com)



Categories: Creativity, Economy & Finance, Entrepreneurship, Regulations & Legal, Strategy, Sustainability, Uncategorized

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