"Global green bond issuance broke new ground during the second quarter with a number of first-time issuances, including the first green bonds issued by a Yield Co and in the Baltics," says Henry Shilling, a Moody's Senior Vice President.
"We expect additional first-time developments in the third quarter, and have already seen the first green bond transaction from a Chinese issuer in July," adds Shilling.
Moody's report highlights that green bonds raised approximately $12.9 billion during the second quarter of 2015, bringing the year-to-date total to roughly $19.1 billion.
The bond proceeds were earmarked for a variety of projects, including renewable energy and energy efficiency, financing hybrid and electric automobiles, and public wastewater treatment and drinking water projects.
All but 5% of green bonds rated by Moody's, based on volume, were in the investment grade category. Aaa-rated green bonds dominated, accounting for 25% of rated issuance.
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Bond returns during the quarter decreased, registering a -2.2% as bond yields generally rose around the globe during this interval. On a similar total return basis in local currency, green bonds performed in line with global investment grade bonds. By geography, the US led with the largest issuance volume, coming to market with 11 issues raising roughly $2.5 billion, or 20% of total issuance. The Netherlands and Germany followed the US in terms of issuance volume by country.
Moody's expects further issuance from China, where Chinese energy solutions provider Xinjiang Goldwind Science & Technology Co. Ltd. became the country's first green bond issuer. The $300 million A1-rated 3-year transaction, issued on or about 24 July, raised funds for general working capital and refinancing purposes.
The issuance follows steps by China's central bank and the Beijing municipal government over the past months to encourage green bond issuance. Moody's expects Chinese entities will likely drive the growth in green bond issuance in Asia over the coming years, as policymakers embrace such securities as a means of financing their environmental policy goals.
Moody's report further highlights the first update to the Green Bond Principles, a set of voluntary process guidelines that came into effect during the quarter.
The update, which reinforced recommended transparency and disclosure practices, strengthened the principles incrementally by adopting minimum performance standards for the project evaluation and selection process, as well as for the management of proceeds.
Nevertheless, concerns over the rigor surrounding project selection, transparency, and the definition of what constitutes "green" continue to be voiced and debated.
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