The first Green Bond was issued in 2008 and in the intervening years, the sustainable bond market has grown to the extent that it is expected to total $500 billion by the end of 2020. It has also developed splintered groupings under the catch-all title of Green, Social & Sustainability Bonds.
The International Capital Market Association (ICMA) issues the definitions and guidelines for the different category of bonds:
Green Bonds enable capital-raising and investment for new and existing projects with environmental benefits.
Social Bonds raise funds for new and existing projects with positive social outcomes.
Sustainability Bonds finance or re-finance a combination of Green and Social Bonds.
The market reached a new landmark on August 3rd when Alphabet, Google’s parent company, issued $5.75 billion in sustainability bonds making this the largest sustainability or green bond issued by any company.
Projects receiving support from the issuance must be within one of eight categories, all of which fall within the ICMA guidelines: energy efficiency, clean energy, green buildings, clean transportation, circular economy and design, affordable housing, commitment to racial equality, support for small businesses in the wake of the Covid-19 pandemic.
Google claims to have been carbon-neutral since 2007 and to have matched their entire electricity consumption with renewables since 2017. They have also already partaken in affordable housing projects and provided financing for initiatives to foster racial equality.
The company’s move to issue bonds reflects the evolving nature of the Green, Social & Sustainability Bonds market. Once the reserve of banks and large financial organisations, it is now an inclusive sector which includes cities, countries, utility companies, universities, railway companies and corporates across the board.
All of these bonds play an important part in helping the green economy as it strives to be at the heart of the post-Covid recovery.