The Opportunity for Bonds to Address the Climate Finance Challenge

Abstract

2014 saw a niche, thematic ‘green bond’ market becomes a new asset class and a talking point among mainstream and SRI investors alike. Over US$36bn was issued in 2014—more than triple any previous year. The development of this thematic asset class has the potential to marginally, but significantly, reduce friction and transaction costs for investors looking for a means of addressing climate change, helping to reduce the cost of capital and speed flows of that capital. This chapter describes how the growth of this new asset class can help direct capital to meet the vast financial requirements involved in a rapid transition to a low-carbon and climate resilient economy and sets out steps to grow the theme.