Green Bonds: Current Development and Their Future

CIGI Paper No. 210

January 29, 2019

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. 

Part of Series

CIGI Papers Series

CIGI Papers present in-depth analysis and discussion on governance-related subjects. They include policy papers that present CIGI experts' positions or contributions to policy debates, and background papers that contain research findings, insights and data that contribute to the development of policy positions.

About the Authors

Olaf Weber is a CIGI senior fellow and an expert on sustainability and the banking sector. He is currently a professor in the School of Environment, Enterprise and Development at the University of Waterloo and a University of Waterloo Research Chair in Sustainable Finance.

Vasundhara Saravade is a Ph.D. student at the University of Waterloos School of Environment, Enterprise and Development, where she also completed her master of environmental studies in 2019.