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The rise of green bonds in financial market 

May 07, 2020

The growing demand for sustainable options among investors has led to the rise of green bonds. Check out this article for more information. 

 

Green bonds investments are spent for environmental projects / Ph: Green_Chidi

 

Green bonds provide one of the most direct ways to raise money specifically for environmentally friendly projects, such as renewable energy or clean transport in order to make a positive impact on the environment. However, what are the benefits of green bonds to investors. Let’s check them out!

 

Are green bonds a safe investment?

 

The growth of green bonds is undeniable. They have surged as an investment category in the last 10 years and is expected to reach nearly US$250 billion this year. Most of green bonds investments are being spent for new and existing environmental projects such as offshore wind projects in the Netherlands and Germany or some other projects related to renewable energy, energy efficiency, and sustainable water and wastewater management. 

We can tell the environmental benefits of green bonds, however, what kind of returns that investors can expect? One of benefits of green bonds to investors is to provide investors with a way to earn tax-exempt income. Also, they will increase their personal satisfaction, knowing that their investments are being used in a responsible and positive manner. Additionally, the demand for green bonds is getting higher, resulting in lower borrowing costs, which means expenditures will be reduced, and the green bonds investors will get more dividends. Therefore, there is no risk to use green bonds for investment.

 

The demand for green bonds is getting higher / ph: Pexels@Arthur Ogleznev

 

Who sells green bonds?

 

There are many types of green bond issuers due to the sector’s rapid growth, including supranational institutions such as the World Bank and the EU’s European Investment Bank, along with local, state and national governments and even corporations. Apple has issued US$2.5 billion in green bonds for energy efficiency and environmental projects. Also, there are more types of bonds being issued. Initially, most of green bonds retail investors and green bond investment funds can only invest in short-duration securities. Today, issuers are offering longer-dated bonds, with the proceeds going to fund specific projects.

The benefits of investing in green bonds has allowed an issuer to facilitate the transition to a more green-oriented business. Hopefully we will see the benefits of these investments to the environment soon.

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