Given the urgency of climate change, it is necessary that our society make a transition toward a green and low-carbon economy. One way to do so is through finance markets that are tailored to fund low-carbon and climate-friendly projects. Such climate finance markets can prove to be an important factor in how fast and how incentivized our society is to make the transition. An important tool in measuring the recent impact of climate change on financial markets has been the green bond. As its name suggest, a green bond allows various issuer types — whether countries or organizations — to mobilise traditional debt investments into projects or assets that can help society adapt or mitigate climate change impacts. Furthermore, green bonds allow investors to fulfill their environment, social and governance concerns and mandates by allowing for climate-aligned investments. This “bonus” moral or green factor is what currently sets the market apart from its traditional counterparts.

This paper explores the popularity of the green bond market and its impact, the growth of the market in the national as well as international context and the need for standardization and regulation. Policy recommendations are provided for various key stakeholders, including regulators, governments and issuers. 

  • Olaf Weber is a CIGI senior fellow. His research focuses on sustainability and the banking sector. He is currently an associate professor at the University of Waterloo. Since 2010, Olaf has held the Export Development Canada Chair in Environmental Finance.

  • Vasundhara Saravade completed her master of environmental science in the SEED at the University of Waterloo.