Green bonds are fixed-income securities associated with environment-friendly projects. The proceeds from green bond issuances are used to finance renewable energy infrastructure such as solar and wind power, low-carbon transport including electric vehicles, and energy efficiency projects. Some other prevalent uses include adaptation to climate change, biodiversity conservation, and pollution control. Governments worldwide are implementing strong legislations and policies to encourage investments in clean energy and mitigation of carbon emissions. This is expected to increase the issuance of bonds earmarked for supporting such eco-friendly ventures.
The global Green Bond Market is estimated to be valued at Us$ 552.5 Mn in 2023 and is expected to exhibit a CAGR Of 8.5% over the forecast period 2024 To 2031, as highlighted in a new report published by Coherent Market Insights.
One of the key driver propelling the growth of green bond market is the rising government support for environmentally friendly projects. Many governments are offering subsidies, tax exemptions, and other financial incentives to boost private participation in green initiatives. For instance, the US government has pledged USD 100 billion annually by 2020 to assist developing nations in achieving their climate goals. Similarly, the European Commission has developed the European Green Deal Investment Plan aiming to mobilize at least EUR 1 trillion of sustainable investments over the next decade. Investors are also confident that green initiatives will have strong government backing, reducing the risk profile of such projects.
The growing emphasis on mitigating climate change impacts and transitioning to a low-carbon economy is another major factor augmenting the issuance of green bonds. With escalating environmental hazards such as rising sea levels, extreme weather events, water scarcity etc., there is increasing commitment from governments, corporations and individuals to curb greenhouse gas emissions and invest in climate adaptation measures. This will continue driving more capital towards green projects through green financial instruments like green bonds.
In the global green bond market, the government green bond segment currently dominates and is expected to continue its dominance over the forecast period. Governments across the world are increasingly focusing on green projects related to renewable energy, energy efficiency, green buildings, pollution prevention, sustainable water and transportation which has led to higher issuance of green bonds by various governments. Some of the major government issuers of green bonds include France, Germany, Indonesia, Nigeria, Poland, Sweden, and the US.
Political: Governments across the world are promoting policies to shift towards cleaner sources of energy and funding projects related to sustainability. This is encouraging more issuance of green bonds.
Economic: Growth in investment towards green infrastructure, technology, and sustainable development is driving the demand for green bonds from different sectors.
Social: Rising environmental consciousness among investors is increasing allocation towards projects having positive environmental impact.
Technological: Advancements in renewable energy sources like solar and wind energy are enabling large scale implementation of green projects.
The Global Green Bond Market Demand is expected to witness high growth over the forecast period supported by supportive government policies and initiatives towards environmentally sustainable development.
Europe currently dominates the global green bond market led by strong government support for green initiatives in countries like France and Germany. The European region is expected to retain its leading position supported by the European Union’s policy push for transition to a greener economy through its Green Deal program. Asia Pacific is emerging as the fastest growing regional market for green bonds led by China, India and Japan increasingly focusing on renewable energy and clean transportation.
Key players operating in the green bond market are Zimmer Biomet, Smith & Nephew, Stryker, DePuy Synthes, Orthofix, Bioventus LLC, DJO Global, Braun, Medtronic, and Globus Medical. Zimmer Biomet and Smith & Nephew are among the leading players in the global market.
1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it