Moody's: Sovereign green bond issues to pick up amid new policies

By Susanna Moon

Chicago, July 9 – Moody's Investors Service said that it expects to see more green bonds by sovereign issuers.

“The pace of sovereign green bond issuance is set to accelerate as governments seek to promote sustainable policy agendas, encourage private capital into low-carbon and climate-resilient infrastructure, as well as signal their commitment to the Paris agreement,” according to a press release by the rating agency.

Seven sovereign issuers have sold $25.5 billion of green bonds so far, with the government of Poland (A2/stable) leading the way with the inaugural sovereign green bond issue in December 2016, the release noted. Since then, France (Aa2/positive), Fiji (Ba3/stable), Nigeria (B2/stable), Belgium (Aa3/stable) and Lithuania (A3/stable) have also issued green bonds.

The government of Indonesia (Baa2/stable) introduced the first sovereign green sukuk early this year, the agency said.

Moody's said it has assigned green bond assessments to four sovereign green bonds to date, including transactions from the governments of Poland, Nigeria and Lithuania for a total of $2.1 billion of assessed debt.

Proceeds from the green bond issues will be used for diverse purposes, which will support investor demand for the securities, the release said.

The agency said that sovereigns tend to spend more of the proceeds on a range of projects, including clean transportation, waste management and land use. In contrast, the broader green bond market is inclined to use funds for energy-related projects.

“Green bond issuance provides a strong signal of a government's commitment to its climate and environmental policy agenda and, in particular, how it intends to raise capital to implement its Paris Agreement commitments,” Rahul Ghosh, a senior vice president at Moody's, said in the press release.

For a copy of the report – “Green Bonds – Sovereign – Sovereign green bond market on course for critical mass, but challenges remain,” go to moodys.com.

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