by Green bonds are fixed-income financial instruments that are exclusively used to finance or re-finance eligible green projects. It helps in channelizing capital towards climate and environmental projects. This includes renewable energy, pollution prevention, energy efficiency, sustainable waste management, sustainable land use and biodiversity conservation, clean transportation and clean water.
The global green bond market is estimated to be valued at US$ 479.06 Bn in 2023 and is expected to exhibit a CAGR of 8.5% over the forecast period 2023 to 2030, as highlighted in a new report published by Coherent Market Insights.
Market Dynamics:
Growing Investors’ Focus on Sustainable Development: Investors are increasingly focusing on sustainable development and therefore shifting their investments towards companies, projects and funds that have positive social and environmental impacts. This growing demand for sustainable investments is expected to drive the issuance of new green bonds by companies and governments for financing environmentally friendly and climate-conscious projects.
Green Bonds Offer Comparatively Higher Yields: Green bonds often command a small premium over conventional bonds as they attract investors from socially responsible as well as traditionally fixed income funds. This leads to comparatively higher yields being offered by green bonds without comprising on the credit quality of the issuer. This has boosted the attractiveness of green bonds among both issuers and investors.
Segment Analysis
The green bond market is dominated by the corporate sector sub-segment. Majority of green bonds issued in the market are from corporates who are raising funds for renewable energy, green buildings, cleaner transportation, sustainable water and wastewater management projects. They find green bonds an attractive option to raise capital for environment-friendly initiatives while also appealing to ESG-conscious investors. Rising sustainability concerns are driving more corporates to adopt greener practices, propelling growth in this sub-segment.
PEST Analysis
Political: Many governments are supporting transition to greener economy through policy measures like carbon pricing, incentives for renewable energy adoption etc. This encourages issuance of green bonds to fund such projects.
Economic: With rising climate change risks, green investing is gaining prominence. Low interest rates are also promoting issuance of green bonds for funding sustainable development goals.
Social: Growing environmental awareness among public and investors is increasing demand for investments in companies demonstrating strong ESG commitments through green bonds.
Technological: Advancements in renewable energy and other green technologies are enabling various sectors to replace carbon-intensive practices with sustainable solutions financed via green bonds.
Key Takeaways
The global Green Bond Market Growth is expected to witness high growth over the forecast period driven by supportive regulations and rising investor appetite for sustainable investments.
Regional analysis:
The European region currently dominates the market owing to strong policy push for climate action initiatives in countries like France and Germany. However, China is emerging as the fastest growing regional market as the government aggressively promotes renewables to meet energy demands sustainably.
Key players:
Key players operating in the green bond market are Zimmer Biomet, Smith & Nephew, Stryker, DePuy Synthes, Orthofix, Bioventus LLC, DJO Global, Braun, Medtronic, Globus Medical. Zimmer Biomet and Stryker have emerged as leaders by making sizeable green bond issuances to finance environmental projects.
*Note:
1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it
