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SEB: Green bonds to raise $185bn this year despite headwinds

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Green bond issuance in 2018 is expected to hit $185bn (€160bn), according to a forecast from Nordic bank SEB.

However, the bank also warned that macroeconomic concerns such as Brexit and international trade tensions could stall new issuance in the short term.

SEB reported in a July market update that $47bn was raised through green bonds in the second quarter of 2018, the second-highest quarterly figure on record. This followed a weaker first quarter figure of $36bn.

However, the bank recorded just $4bn of new issuance in July, down “at least 40%” compared with July 2017.

“The decreasing growth rate overall for the market has its roots intertwined in a number of dynamics, most of which are not specific to green finance,” SEB said. “The overall bond market has slowed in 2018 and fickle market conditions have held back issuance globally in July.”

However, the bank maintained that the second half of this year would be more positive for new green bond issuance with “heightened activity” in corporate markets such as the US.

While SEB’s “base case” for green bond fundraising was $185bn for the year, it said there was a “possibility” for as much as $210bn. 

Christopher Flensborg, head of climate and sustainable finance solutions at SEB, said: “What is also promising in the mid-term is the rise in corporate lending which we and a number of our peers are experiencing currently…

“Corporate treasurers are spending an increasing amount of time examining their funding options, hence, leading to prospects for larger corporate issuance ahead – and thereby also more attention to the green bond market.”

SEB reported 17 publicly announced green bond fundraising drives planned for the rest of 2018, including corporate and supranational issuers from a range of countries including Argentina, Belgium, India, Mexico, Nigeria, South Korea, and the US. 

According to Standard & Poor’s, the green bond market was worth $372bn at the end of December 2017. 

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