Moody’s: EMEA sub-sovereign green bond issuance has growth potential


Facing an increased need to invest in measures that limit the impact of climate change, sub-sovereigns could become significant issuers of green bonds, says Moody’s Public Sector Europe in a report.

Moody’s report, entitled “Sub-sovereign green bond issuance has growth potential,” is available on Moody’s subscribers can access this report via the link provided at the end of this press release. The rating agency’s report is an update to the markets and does not constitute a rating action.

As of June 2016, 12 green bond transactions worth USD2.3 billion had taken place in EMEA since the first issuance in 2012.

“Recent green bond issuances by EMEA municipalities have been oversubscribed, suggesting that investor demand for environmentally-friendly debt is strong,” says Gjorgji Josifov, Assistant Vice President — Analyst at Moody’s.

“The global market for green bonds is developing rapidly, although municipal green bond issuance is growing slowly in EMEA.”

Traditionally dominated by supranational issuers (European Investment Bank, World Bank and European Bank for Reconstruction and Development), green bonds have become attractive to other groups of issuers, including local governments.

The wide range of different types of green investment required means there are investment opportunities in all asset classes, sectors, industries and countries.

However, the region’s municipal green bond market is still at an embryonic stage, and faces challenges including a lack of large—scale green infrastructure projects and a lack of market standardization.

Green bond issuance by EMEA municipalities is constrained by a limited number and small size of green projects that are suitable for bond finance. This is partly because local governments to date have not strategically promoted green projects that could attract private sector investment.

The absence of a robust green project pipeline makes it difficult for investors to plan. Furthermore an inconclusive cost-benefit analysis of green bonds makes it difficult for sub-sovereigns to opt for green bond versus traditional issuance.

Subscribers can access the report at:

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