According to Standard & Poor's (S&P), GDF Suez's recent issue of $3.4 billion in green bonds shows the rising importance of green bonds as a source of capital, driven by the needs of corporations and a desire by investors to allocate capital to socially responsible and environmentally sustainable investments.
As a result, S&P predicts the value of the green bond market will reach $20 billion this year, almost double its current value of $10.4 billion.
For investors, the credit risk of a corporate green bond remains on the issuer's balance sheet. Unlike with multilateral bank issuance, investors do not have to sacrifice yield to gain green exposure, nor significantly increase their risk profile in order to invest in assets that aid environmental efforts, S&P says.
This can satisfy investors' requirements for yield, while safeguarding their reputation for socially responsible investing.
S&P says it is likely that the market will begin to see structuring of bonds to enhance credit support, as evidenced by Toyota's use of securitizations of car loans to collateralize its corporate green bonds, which were quickly oversubscribed.
