The green bond market consists of debt securities issued by governments, municipalities, state-owned entities and corporations in order to raise funds earmarked for new and existing projects with environmental benefits. Green bonds have emerged as an efficient way for organizations to gain access to dedicated funds for renewable energy, pollution reduction, efficient buildings, biodiversity conservation and other climate-friendly investments. Rising awareness regarding the need for sustainability and transition towards a low-carbon economy have propelled the issuance of green bonds over the past few years.
The global green bond market size is estimated to be valued at US$ 552.5 Mn in 2024 and is expected to exhibit a CAGR of 8.5% over the forecast period 2024 To 2031.
Key Takeaways
Key players operating in the green bond market are Zimmer Biomet, Smith & Nephew, Stryker, DePuy Synthes, Orthofix, Bioventus LLC, DJO Global, Braun, Medtronic, Globus Medical. Governments and regulators across various countries are introducing supportive policies and regulations to promote investments in renewable energy and clean transportation. This is expected to offer lucrative opportunities for green bond issuance. Furthermore, many developing nations are increasingly focusing on building eco-friendly infrastructure to achieve long-term sustainability goals, which will drive the demand for green financing through bonds.
Market drivers
Rising investments in renewable energy generation is a key factor driving the green bond market. Global spending on renewable power installations has been increasing annually as more countries aim to transition towards cleaner sources of electricity and meet their decarbonization commitments under the Paris Agreement. Between 2020 and 2024, global investments in renewables are projected to surpass US$ 4 trillion. Similarly, governments around the world are allocating massive funding for green buildings, zero-emissions transportation, sustainable water solutions and several other climate change mitigation projects. This substantial rise in green capital expenditure is anticipated to boost the issuance of green bonds during the forecast period.
PEST Analysis
Political: Green bonds are politically encouraged in many countries as they help nations meet their emission reduction targets and transition towards green economies. Governments provide various policy support and incentives for issuance of green bonds.
Economic: Post covid economic recovery programs of many countries emphasize on green infrastructure and clean technologies. This drives the issuance of green bonds for financing such projects. The projected high GDP growth especially in developing nations also increases the resources available for green investments.
Social: Growing awareness among general public and investors about climate change challenges the demand for low carbon and sustainable investment options. Green bonds help channel investments towards essential climate friendly sectors like renewable energy, green buildings etc in a transparent manner.
Technological: Digitization and use of blockchains can streamline the issuance process of green bonds and make the reporting of funds usage and impact verification more efficient. Emerging innovative green technologies in areas like energy storage also boost opportunities for green financing.
Geographical regions: Europe accounts for the largest share of green bonds issuance in terms of value, especially Western European nations like France and Germany. This is due to the well established green finance policies and commitments towards climate targets in the EU region.
Asia Pacific region is emerging as the fastest growing market for green bondsdriven by countries like China, India and Japan. This reflects the rising investments towards renewable energy and other green initiatives associated with sustainable development plans of nations in the Asia Pacific.
About Author:
Money Singh is a seasoned content writer with over four years of experience in the market research sector. Her expertise spans various industries, including food and beverages, biotechnology, chemical and materials, defense and aerospace, consumer goods, etc. (https://www.linkedin.com/in/money-singh-590844163)
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