Global 'green bond' issuance hits record high as ethical investing continues to rise

The issuance of global green bonds – investment instruments created to encourage sustainability initiatives and projects – peaked at fresh highs during the third quarter of 2017, setting a new quarterly issuance record, while total green bond volumes surged in the first nine months of the year versus a comparable year ago period, according to a new report.

New research by ratings agency Moody's suggests global green bond issuance year-to-date 2017 has already eclipsed full-year 2016 record issuance, as their popularity continues to soar.

During the third quarter, 83 individual issuers brought 111 transactions to market, similar to the second quarter when a record 116 transactions appeared in the market by a record 85 distinct issuers.

"Global green bond issuance totalled $32.7bn (£24.81bn) in the third quarter of 2017, just topping $32.2bn of issuance in the second quarter and setting a new quarterly issuance record for the decade-old market," said Moody's analyst Matthew Kuchtyak.

"Total green bond volumes for the first nine months of the year hit $94.5bn, a 49% increase over the $63.2bn of issuance during the first nine months of 2016."

Average transaction size increased slightly in the third quarter with an average of $295m per transaction, compared to $278m in the second quarter.

Non-financial corporate green bond issuance regained the top spot in the third quarter after relinquishing the title in the second quarter. Corporates accounted for a strong $18bn of issuance, or 55%, in the quarter with 93% of these deals investment grade rated.

"We continue to observe marginal increases in speculative-grade issuance, though this remains a small portion of the total green bond market. Following 5% of rated issuance in the first quarter and 6.4% of rated issuance in the second quarter, speculative-grade green bonds represented 7.2% in the third quarter," Kuchtyak added.

For full year 2016, 1.4% of green bond issuance was speculative grade compared to 6.1% year-to-date for 2017. Continuation of this trend would mark a further maturation of the green bond market globally as issuers with a wider range of credit quality would be participating in the market.

Another signal of maturation is a growing number of emerging market green bond issuance, according to the ratings agency. Though this component of the market has experienced a slowdown in new deals during the first nine months of the year, new transactions continue to post fresh highs. That said, the rate of growth in the green bond market is slower than Moody's originally expected a year ago.