Green Bond Issuance Sets New Record in 2020

Green bond issuance grew for the ninth straight year, climbing to a record high of $269.5 billion at the end of last year, up from $266.5 billion in 2019, according to not-for-profit organization Climate Bonds Initiative, which said 2021 could be another record year, with issuance rising to as high as $450 billion.

The $3 billion increase in issuance from 2019 was rather modest compared with the previous year, when issuance ballooned by more than $95 billion between 2018 and 2019. The sharp deceleration in growth was due the impact of the COVID-19 pandemic on the green bond market during the second quarter. However, record-breaking issuance during the third quarter helped prevent the end of the market’s nearly decadelong winning streak.

Green bonds, loans, and sharia compliant sukuk bonds originated from 53 countries, while green loans and green sukuk—i.e., not including bonds—originated from 23 countries in 2020, more than twice that of the previous year when those instruments originated from only 11 countries.

While the market has been growing for the past nine years, green bonds have been accelerating sharply over the past five years, with 60% average annual growth since 2015. In the past five years, the green debt capital market has grown from a cumulative volume of $104 billion to $1.05 trillion at the end of 2020.

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The US had the largest issuance of green bonds by country with $51.1 billion, followed by Germany with $40.2 billion, and France with $32.1 billion. China and the Netherlands rounded out the top five with $17.2 billion and $17 billion in issuance, respectively. The next five highest totals were in Sweden, Japan, Canada, Spain, and Norway.

Fannie Mae was the largest green bond issuer last year with a total issuance of $13 billion through its Multifamily Green MBS program, which finances green mortgages backed by multifamily properties that have green building certifications or display audited efficiency improvements. Germany was the second largest ranking green bond issuer in 2020, thanks to its inaugural green sovereign bond, at $12.8 billion; and French state-owned transport company Société du Grand Paris was the third largest green bond issuer at $12.2 billion.

The Climate Bonds Initiative said transport operators and sovereign nations led the largest certified issuers. Société du Grand Paris was the largest certified issuer last year, followed by the New York Metropolitan Transportation Authority (MTA), which issued $4 billion in climate bonds during the year, and the Republic of Chile, which issued $3.8 billion worth of the bonds.

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Tags: Climate Bonds, Fannie Mae, Green Bonds, green loans, Multifamily Green MBS, sukuk

OK, so did last week’s Robinhood-Reddit-GameStop market turbulence sound the death knell for this bull market? Is that a bubble we hear popping?

Naaaah, says Jack Ablin, the well-regarded CIO and founding partner of Cresset Capital, who used to head investments at BMO Harris Bank and Bank of Boston (now part of Bank of America).

“While pockets of speculation could be creating a bubble, we don’t believe the blowback would impair the entire market or financial system,” he wrote in a commentary. The novice investors who are bidding up GameStop’s price to the troposphere lack the resources to impair the system, he argued.

Make no mistake, though, this rebellious bunch has created a disturbance in the investing world, he pointed out. “Robinhood investors working together have amassed important buying power,” he found. The Robinhood website says it has 13 million customers with an average account size of $1,000 to $5,000. Hence, their collective buying power is between $13 billion and $65 billion.

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“This thundering stampede has disrupted the institutional marketplace, taking seemingly rational investments and turning them upside down,” he said. The beneficiaries have been momentum stocks and penny stocks. And, of course, the novice online traders have damaged established players who have shorted the likes of GameStop.

This rebellion was one factor in last week’s 3.3% drop in the S&P 500. But Monday’s rebound, at midday, up 1.5%, illustrates the temporary nature of the recent slide.

While all this speculation has made the market seem like a bubble, in danger of bursting, Ablin indicated several factors that would prevent such a fate. Although some parts of the economy are weak—for example, about 2.5 million fewer food service jobs exist now than were around pre-pandemic—other parts are strong. Personal income and household savings are near record levels, with nearly $5 trillion in money market funds.

Second, he continued, the capital markets are awash in unprecedented liquidity, the result of aggressive Federal Reserve steps and fiscal support from the federal government. Bond yields are at historic lows and high stock valuations excesses could last for a long time.

“At the same time,” he wrote, “emboldened retail investors are not about to hide under their covers in the event of a selloff.” Likely, they’d use it as a buying opportunity, he predicted.

“Goals-based investing isn’t as exciting as speculation,” Ablin noted, “but it’s certainly better for getting a good night’s sleep.