Saturday, August 19, 2017

Green Capitalism

Emerging economies are increasingly selling green bonds to Western investors seeking environmentally-friendly investments. Green bonds are intended to finance environmental projects such as solar and wind farms. $32.2 billion-worth of them were issued in the second quarter of 2017, according to Moody's. Issuance from emerging markets has jumped from $2.3 billion to $9.2 billion year-on-year, about half the total from developed markets, versus 16 percent a year ago. China accounts for over two-thirds of total emerging market green issuance and a fifth of the global tally, even though it is classed as the world's bigger polluter by carbon emissions.
It issued $23 billion of green bonds in 2016, up from just $1 billion in 2015, according to the Climate Bonds Initiative. But there is a concern some of the new deals don't meet the standards required. Bonds from polluting countries are one example; investment in controversial hydro projects another.

Lombard Odier's Global Climate Bond fund, for example, did not buy Poland's sovereign green bond, issued last year, concerned about issuer responsibility and so-called greenwashing. This is where an issuer promotes green initiatives but operates in a way that damages the environment. The Polish bond was still oversubscribed, though.
"To protect its coal industry, Poland has repeatedly vetoed climate policies and obstructed negotiations both at EU and international levels and is seen to be infringing EU law through its continued subsidies," said Stuart Kinnersley, chief executive of Affirmative Investment Management, which co-manages the fund with Lombard Odier. 

In China's case, meanwhile, only 10 percent of green bonds sold last year had independent verification on the use of proceeds. One issue is that Chinese green bond guidelines allow funding for "clean coal" power stations, which do not qualify under other market standards. China has acknowledged the issue and the state-run Bank of China successfully raised $500 million from a green bond issued in London last year. The deal was oversubscribed 1.8 times, attracting European investors.

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