Green bonds: a solution for financing the energy transition or a simple buzzword?

E. Buttin

Quarterly selection of articles - Bulletin de la Banque de France, 2016, issue 44, 20-27

Abstract: The COP 21 conference stressed the importance of directing financial flows towards the financing of the energy transition. Given the magnitude of the needs (over USD 53 trillion by 2035), new sources of financing are needed, such as green bonds. This article looks at the underlying factors of the boom in this market and the tools that would help to develop it without increasing the risks to financial stability. Green bonds are seen as a privileged financing instrument, both by issuers to diversify their investor base and benefit from oversubscription, and by investors to fulfill their mandate and implement their long-term strategy. Thus, green bond issuance increased four-fold between 2013 and 2015, reaching USD 42 billion in 2015. However, green bonds pose risks (counterparty risk, credit risk, green washing risk, which consists in terming projects green where they are not) and additional costs compared to standard bond issuance (labeling, reporting). To develop this market, public authorities have a role to play in fostering its organisation, without, however, increasing the risks for the financial system.

Keywords: green bonds; investment; energy transition; financial regulation (search for similar items in EconPapers)
JEL-codes: G12 G18 G23 Q01 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:bfr:quarte:2016:44:02

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