99662 What are Green Bonds? What are Green Bonds? What are Green Bonds? Chapter I Chapter II Chapter IIi FOreword Understanding Understanding Benefits bonds Green bonds and Potential 2 What are Green Bonds? 3 Foreword The explosive growth of green bonds in the capital markets is increasingly attracting attention from investors. This surge in interest has created a interested in better understanding the demand for accessible information on nature of green bonds. The content will the green bond market. This primer was aim to distinguish green bonds from created in response to this demand and other traditional financial instruments. covers the principles of this relatively It will also provide insight into the new financial instrument. The following potential of green bonds to mobilize intends to serve as a guide for those new sources of climate finance. DISCLAIMERS No Offer or Solicitation Regarding Securities. This document may include references and information relating to certain securities. Any such information is provided only for general informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy any securities. The securities mentioned herein may not be eligible for sale in certain jurisdictions or to certain persons. 4 Foreword 5 Chapter I What is a bond and how does it differ from Understanding other financing options? A bond is a form of debt security. bonds A debt security is a legal contract for money owed that can be bought and sold between parties. Entities seeking financing to as fixed-income securities. have two basic options to raise Once purchased from the issuer funds: stocks (equities) and (through financial institutions bonds. Bonds are a form of acting as dealers), bonds can debt, whereas stocks are a form continue to be traded in the of ownership. securities market. Investors in bonds become Investors in stocks, on the creditors of the issuing entity. other hand, purchase a portion They are paid a fixed interest of the issuing firm. Therefore, rate (coupon) and returned the returns of their investment their initial investment fluctuate in accordance with (principal) upon maturity. dividends paid by the issuing Because bonds typically pay a firm and the value of the issuing fixed interest over the maturity firm. Stocks are also traded in period, they are often referred the securities market. 6 7 What are the requirements, bond. For example, in December 2014, the Bay Area Toll Authority and who can issue bonds? in northern California issued bonds (private and public examples) in the amount of US$811.4 million. The bonds have been assigned an “AA/Stable” rating by a credit agency, Issuers of bonds can be private Standard & Poor’s. The bonds’ proceeds will be used to finance companies, supranational and refinance the construction, institutions (such as multilateral improvement, and equipping of the bridges and toll roads in the San banks), and public entities Francisco Bay Area.1 (municipal, state, or federal). Corporate Bonds Issuing bonds is a complex process involving several steps to meet A bond issued by a company is referred requirements of specific markets and to as a corporate bond. Corporate bonds countries of issuance. Figures 1 and 2 can either be designed for institutional HOW DO CREDIT RATINGS Why do investors sometimes present examples of corporate bond investors (insurance companies, banks, issuance requirements in Brazil and hedge funds, and the like) or retail RELATE TO THE RISK-RETURN choose bonds over other China, respectively. investors. For example, in late 2014, FUNDAMENTAL OF INVESTING? investment or saving heart-rhythm device maker Medtronic Entities issuing bonds must disclose Inc. issued a US$17 billion corporate opportunities? financial information to regulators, bond to help fund its acquisition of a Investors seek returns rating agencies, and investors. Bond surgical gear maker.2 commensurate to the risk of An investor may choose to issuers appoint investment banks as “underwriters” to help them meet Multilateral Development Bank investment opportunities. invest in the bond market these requirements, drawing on their Bonds over other alternatives expertise of bond markets, government Many investors have mandated regulations, and other related factors. Other types of issuers include multilateral thresholds for risk tolerance and for several reasons. development banks (MDBs) and other often compare risk-adjusted returns Government Bonds supranationals or international agencies. to a benchmark or reference. In Fixed-rate bonds offer fixed returns For example, the World Bank, an MDB judging risks of various investment over a fixed time, in fixed periodical A bond issued by a public that issued its first bond in 1947, recently opportunities, including assessing installments. This generally makes for a governmental entity, such as a city issued a landmark US$4 billion 10-year the creditworthiness of bond more predictable, less risky investment or state, to finance its activities is transaction, raising funds from different issuers, investors use their own due than other investment options. This commonly referred to as a municipal types of investors all over the world.3 diligence and other sources, such as higher predictability of cash flows credit ratings by the rating agencies makes bonds a good counterbalance (for example, Fitch, Moody’s, or to riskier, more volatile elements in an Standard & Poor’s). investment portfolio. Financial terms presented in italics are defined in the Glossary on pages 50-51. 8 What are Green Bonds? I. Understanding Bonds 9 Issuing bonds Figure 1 Figure 2 issuing bonds in brazil Issuing Bonds in Brazil Source: Leal, Ricardo P. C., and Andre Carvalhal da Silva, "The Development of the Brazilian Bond Issuing Bonds in China Sources: ADB (Asian Development Bank), ASEAN+3 Bond Market Guide. (Manila: ADB, 2012); in china Market," IADB (Inter-American Development Bank) "Introduction on Corporate Bonds," Shanghai Stock paper, IADB, Washington, DC, October 2006. Exchange, accessed Nov. 11, 2014, http://english.sse. com.cn/listing/bonds/corporate/overview/. 1 2 3 1 2 3 Find underwriter Register with the CVM Due diligence Choose underwriter Register with CSRC Decision Brazil's Securities and Exchange (China Securities Regulatory Verification and Commission (CVM). Commission). approval system. 6 5 4 6 5 4 Publish financials Get approved If denied Size of the bond Get rated Information disclosure Official letter Can appeal denial. Accumulated balance cannot Eight major credit rating Prospectus, issuance notes, of registration issued. exceed 40% of the net assets agencies exist. China's Central financial report, and audit of the company. Bank serves as the main report, and so on. supervisory authority. 7 8 9 7 8 9 Get rated (optional) Issue bond Stay listed Apply for listing Issue bond Purpose Is required in prudential And list bond in the Sao Continue complying No unified rules exist for the China Securities Depository Funds must be invested in regulations for closed Paulo Stock Exchange. with requirements. listing of Shanghai Stock Exchange and Clearing Corporation conformity with national industry pension funds. and Shenzhen Stock Exchange. Limited is the registration and policy, and filed with CSRC. settlement institution. 10 What are Green Bonds? I. Understanding Bonds 11 What is the context of bonds in global financial markets? Globally, financial markets— The largest markets were in the United States both equity and debt—were (32 percent), Western Europe (30 percent), worth US$212 trillion in Japan (12 percent), and other regions, as 2010, with bonds reaching shown in figure 3. Emerging financial markets about US$93 trillion or 44 account for about 17 percent and are growing percent of the total. fastest, particularly in China and India. Figure 3 Composition of Global Financial Markets, 2010. United States  31.9% Western Europe  30.1% US$212 trillion US$54 trillion- Stock market capitalization US$64 trillion- Loans outstanding Other Asia  1.3% US$93 trillion- India  1.5% Bonds outstanding Middle East and Africa  2.0% CEE and CIS*  2.5% Latin America  2.7% China  7.6% Japan  11.7% Other Developed  8.7% 2010 Source: Roxburgh, Charles, Susan Lund, and John Piotrowski, “Mapping Global Capital Markets 2011,” McKinsey Global Institute Updated Research (McKinsey & Company, August 2011), based on data from the Bank for International Settlements, Dealogic, Securities Industry and Financial Markets Association (SIFMA), Standard & Poor’s, and McKinsey Global Banking Pools. * CEE and CIS = Central and Eastern Europe and Commonwealth of Independent States. 12 What are Green Bonds? 13 How do emerging financial Map 1 markets compare? US$29,800 Financial and Securities US$1,175 Markets, Selected US$927 Asia Pacific and Latin America are the Geographical Regions, 2014 RUSSIAN FEDERATION, largest emerging financial markets. Eastern Europe The total value (market capitalization) & Central Asia of their equity market is 20–30 times higher, and the size of their bond markets 4–5 times bigger, than those of Africa Stocks Bonds and the Middle East, and the Russian Federation, Eastern Europe, and Central Asia combined. US$20,068 International Nonfinancial US$5,989 Financial Government Stocks Asia In 2014 US$, billions pacific Source: US$1,150 Background map: IBRD US$4,193 Stocks Bonds WLD41787, August 2015. US$663 Data from Bank for International Africa and Settlements, BIS Quarterly Review, middle east September 2014 (Basel: BIS, 2014); World Federation of Exchanges latin america database (http://www.world- Stocks Bonds exchanges.org/statistics); Financial Times database (http://markets. Stocks Bonds ft.com/research). Note: Equities are the total market capitalization of that particular region's developing countries. Bonds are reported as amounts outstanding. 14 15 Asia Pacific Bond Market Asia Pacific’s bond market is the largest among emerging nations in large part US$4,316 because of China’s growing US$4.3 US$4,092 trillion bond market. The region also China contains the highest concentration of AA- Stable developing countries with growing domestic and international bond markets. Map 2 Asia Pacific Bond Market, Selected US$693 US$679 Countries, 2013 -14 US$336 US$299 India Thailand BBB+ Stable BBB- Stable 2013 2014 2013 2014 Source: Background map: IBRD SOA41789, August 2015. ©World Bank. Permission required for reuse. US$131 US$134 Data from Bank for International Settlements, BIS Quarterly Review, Phillippines September 2014 (Basel: BIS, 2014); BBB Stable Standard & Poor's credit rating as of Sept. 28, 2014. 2013 2014 Note: All values are in US$, billions. US$393 Bonds are reported as amounts US$384 US$175 outstanding. US$164 Indonesia International Malaysia BB+ Stable A- Stable Nonfinancial 2013 2014 2013 2014 Financial 2013 2014 Government 16 17 US$764 US$735 US$2,413 US$2,305 US$128 US$124 Colombia Mexico BBB Stable BB+ Stable 2013 2014 2013 2014 Latin American Bond Market Some countries in the Latin American region have fast-growing domestic debt markets and sizable international investor participation. Map 3 Brazil Latin American Bond Market, Selected BBB- Stable Peru US$63 US$56 Countries, 2013-14 BBB+ Stable Source: Background map: IBRD LAC41788, August 2013 2014 2015. ©World Bank. Permission required US$809 US$770 for reuse. Data from Bank for International 2013 2014 Settlements, BIS Quarterly Review, September 2014 (Basel: BIS, 2014); Standard & Poor's credit rating as of Sept. 28, 2014. Note: All values are in US$, billions. Bonds are reported as amounts outstanding. US$169 US$168 Argentina International Chile CCC+ Negative AA- Stable Nonfinancial Financial 2013 2014 2013 2014 Government 18 19 References 1."San Francisco Bay Area Toll Bridge Revenue Bonds," Bay Area Toll Authority, Dec. 9, 2014, http://emma.msrb.org/ER818648-ER637347-ER1038975.pdf. 2. Medtronic, “Medtronic Prices $17 Billion in Private Placement of Senior Notes," press release, Dec. 1, 2014, http://newsroom.medtronic.com/phoenix.zhtml?c=251324&p=irol- newsArticle&ID=1993937. 3. World Bank Treasury, “World Bank Raises USD 4 Billion in a Landmark 10-Year Global Bond," press release, Nov. 18, 2014, http://treasury.worldbank.org/cmd/htm/ USD_4BillionLandmarkGlobalBond.html. 20 What are Green Bonds? 21 Chapter II Understanding What is a Green bond and how does it differ Green Bonds from a regular bond? A green bond is a debt security that is issued to raise capital specifically to support climate- related or environmental projects. This specific use of the financial characteristics (such funds raised —to support as maturity, coupon, price, the financing of specific and credit quality of the projects— distinguishes issuer), investors also assess green bonds from regular the specific environmental bonds. Thus, in addition to purpose of the projects that evaluating the standard the bonds intend to support. 22 What are Green Bonds? II. Understanding Green Bonds 23 WHY DID MULTILATERAL DEVELOPMENT BANKS ISSUE THE The World Bank (International Bank FIRST GREEN BONDS? for Reconstruction and Development or –IBRD–) launched the first labeled Several multilateral banks have issued green bond in 2008 in the amount bonds supporting the financing of of SKr 3.35 billion (approximately “green” projects, including the following: US$440 million).6 The rationale for this first green bond was threefold: • First, it responded to specific demand from Scandinavian pension funds seeking to support climate-focused projects The African Development Bank through a simple fixed-income product. (AfDB) serves the development needs of It also fit well with IBRD's efforts to its member countries and issued a first cater to investors interested in sustainable US$500 million green bond in October and responsible investing (SRI). 2013, building on previous experience with clean energy bonds for the • Second, it supported the World Japanese retail market.4 The proceeds Bank's strategy to introduce are allocated to support the financing innovation in climate finance. of climate change solutions as part of • Third, by focusing on climate change has issued over 37 green bonds, raising a broader strategy to support inclusive mitigation and adaptation projects, US$3.8 billion outstanding in nine and sustainable growth in Africa. World Bank Green Bonds helped The International Finance Corporation currencies.8 Climate change is a major raise awareness among investors and (IFC), also part of the World Bank strategic priority for IFC. Since 2005, the financial community about how Group, initially issued green bonds in IFC has committed more than US$13 developing countries can take action 2010 at the demand of investors seeking billion to climate-smart projects, some of on climate change but also stand to climate-related investments with a fixed which have been funded by green bonds. The European Investment Bank be affected by it. income. IFC’s inaugural green bonds (EIB) issued a €600 million Climate were in relatively small sizes to fit the Awareness Bond in 2007 that investor appetite at the time. As investors focused on renewable energy and As of the end of June 2015, the World became more engaged in the climate Other multilaterals and agencies that energy efficiency.5 Instead of a fixed Bank (IBRD) has issued US$8.5 billion arena, IFC met the growing demand have also issued green bonds include coupon, the bond returns were linked in over 100 green bond transactions with larger bond sizes, culminating in the Asian Development Bank (ADB),9 to an equity index (such a bond is in 18 currencies, supporting about two US$1 billion three-year green bonds the European Bank for Reconstruction commonly referred to in the bond 70 climate mitigation and adaptation issued in 2013, the largest green bonds in and Development (EBRD),10 and the market as "structured"). projects around the developing world.7 the market at the time. To date, IFC Nordic Investment Bank (NIB).11 24 What are Green Bonds? II. Understanding Green Bonds 25 How do green bonds fit into an member countries. As a multilateral development cooperative, IBRD offers issuer’s funding strategy? the same pricing in its lending to all its member countries in lending rates Green bonds allow issuers to reach that reflect its total average funding cost plus a percentage spread. Because IBRD different investors and promote green bonds are part of its general their environmental credentials. funding program, lending rates for projects included in IBRD’s green bond For example, the World Bank (IBRD) program receive the same treatment as designed the green bond as part of all other IBRD loans. its overall bond program to cater to sustainable and responsible investors In the case of IFC, green bonds are aimed and promote its support of climate at its renewable energy investments and change projects in its borrowing energy efficiency investments. The World Bank’s Bond Program The World Bank (IBRD) is a development cooperative owned by 188 member countries and is the original institution of the World International Finance Corporation Bank Group. The World Bank was created at the end of World War II and issued its first bond in 1947 to raise financing that helped IFC is a member of the World Bank Group established in 1956 the reconstruction of war-torn Europe. The World Bank’s focus later and owned by 184 member countries. IFC provides loans and shifted toward broader economic development to help its borrowing equity investment, advisory services, and asset management on a member countries reduce extreme poverty and share prosperity with commercial basis. It is the largest global development institution the bottom 40 percent of the population in income terms. focused exclusively on the private sector in developing countries. Its global portfolio is highly diversified and contains debt and equity Today, the World Bank issues a wide range of debt instruments to exposure in 126 countries and nearly 2,000 companies. By June 30, raise financing for the development programs it supports in borrowing 2014, investments outstanding totaled US$38 billion. member countries. The World Bank is rated triple-A by Moody’s and Standard & Poor’s based on its solid financial structure, conservative IFC has a US$84 billion balance sheet and is rated triple-A. It has financial policies, and strong capital base. IBRD has a high-quality funded its investments primarily by issuing bonds since 1989. The globally diversified loan portfolio. The loans and financial services are bond program for 2016 is US$17 billion, to be raised by accessing only extended to sovereign governments and projects with sovereign various markets including green bonds for the additional value of guarantee. For its fiscal year ending June 30, 2015, IBRD outstanding investor diversification. IFC’s green bonds attract new investors loans and guarantees were US$154 billion, and the total bonds issued and highlight IFC’s work in providing climate-smart solutions to were worth a total of US$58 billion equivalent. emerging-market private sector clients. 26 What are Green Bonds? II. Understanding Green Bonds 27 What is the Green bond Process? Using the World Bank (IBRD) process as an example, the steps followed by most green bond issuers generally fall into four categories: 1 2 3 4 Define project selection criteria. The Establish project selection process. Earmark and allocate proceeds. Monitor and report. The issuer monitors issuer defines the kind of green projects All World Bank projects –including the The issuer discloses how it will the implementation of the green projects it seeks to support with green bonds. For projects supported by its green bonds– separate green bond proceeds and and provides reports on the use of the World Bank, such eligible projects undergo a rigorous review and approval make periodic allocations to eligible proceeds and the expected environmental must support the transition to low-carbon process, which includes early screening, investments. The World Bank credits sustainability impacts. Summaries and key development and climate-resilient growth. identifying and managing potential green bond proceeds to a special account impact indicators for green-bond-eligible The selection criteria are often reviewed environmental and/or social impacts, and invests the funds in accordance with projects are provided on the World Bank’s and assessed by an external expert party and obtaining the approval of the its conservative liquidity policy until they Green Bond website with links to relevant to provide investors the assurance that Bank's Board of Executive Directors. are used to support eligible green bond documents and more detailed project they meet generally accepted technical Subsequently, environmental specialists projects.  Funds are periodically allocated information.12 definitions. The World Bank's green bond then screen the approved projects to in an amount equal to the disbursements criteria were defined in consultation with identify those that meet the World of eligible projects. the initial investors and underwent an Bank’s green bond eligibility criteria. independent review by the Center for International Climate and Environmental Research at the University of Oslo (CICERO). CICERO concurred that, combined with the governance structure of the World Bank, the World Bank eligibility criteria provided a sound basis for selecting climate-friendly projects. 28 What are Green Bonds? II. Understanding Green Bonds 29 What are the Green bond Principles? How do issuers define what is ‘green’ with credibility? As the market grew rapidly, market players have sought to bring greater clarity to the definitions and processes associated Issuers define categories for environmental projects they plan with green bonds. Using the experiences of the multilateral to support with green bonds and report back to investors development banks, in early 2014, —a group of banks initiated depending on their business model and context. the development of the Green Bond Principles (GBP)—a set of voluntary guidelines framing the issuance of green bonds.13 In a second edition published in March The GBP recognize several broad categories 2015, the GBP encourage transparency, of potential eligible projects, which include Drawing from the practice of earlier issuers The market has been relying on disclosure, and integrity in the but are not limited to the following: and the GBP , green bond issuers have issuer disclosures, second opinions, development of the green bond market. • Renewable energy developed their own green bond definition and commentary from academics; The GBP suggest a process for designating, and process to suit their business profiles. investment advisers; auditors; disclosing, managing, and reporting on the • Energy efficiency (including efficient technical experts; media; and proceeds of the bond. They are designed buildings) Investors in green bonds expect information nongovernmental organizations to provide issuers with guidance on the • Sustainable waste management from issuers in sufficient detail to allow (NGOs) such as CICERO, the key components involved in launching them to assess green bond offers, such Climate Bonds Initiative, Det Norske • Sustainable land use (including a green bond, including providing as how issuers track and use green bond Veritas, (DNV), Norway, Oekom, sustainable forestry and agriculture) information to aid investors in evaluating proceeds and how they report the positive Sustainalytics, and Vigeo, among the environmental impact of their green • Biodiversity conservation impacts expected from green projects. others. Also, several green bond bond investments. The International • Clean transportation The Investor Network on Climate Risk (a indices (for example, Barclays/Morgan Capital Markets Association acts as the North American nonprofit organization Stanley Capital International [MSCI], GBP's secretariat and facilitates the work • Sustainable water management convened by Ceres that advocates for Standard & Poor's, and Solactive) are of its members, including issuers, investors, (including clean and/or drinking water) leadership in sustainability) has articulated useful benchmarks for green bond banks underwriting green bonds, and other • Climate change adaptation its “expectations” in a statement to guide portfolios and support transparency in market participants. issuers and other market participants.14 definitions and processes. 30 What are Green Bonds? II. Understanding Green Bonds 31 WHAT ARE SOME EXAMPLES OF bonds with maturities ranging from 5 to million in green bonds in May 2014 to 2013 and US$600 million in May GREEN BONDS BY TYPE OF ISSUER? 17 years in September, 2014—to finance finance the construction of shopping 2015—to finance renewable energy environmentally beneficial projects in malls that meet the standards of the projects such as wind, solar, and A variety of issuers have taken the early clean water, energy efficiency, and land U.S. Green Building Council.23 geothermal energy as well as energy examples of MDBs and the GBP and remediation, among other areas.18 efficiency projects.25 developed processes that work for their Toyota Financial Services issued a business models and practices. Many US$1.75 billion green bond in March ABN AMRO of the Netherlands issued have worked with investors to fine- Bi–lateral trade and development agencies 2014 to fund consumer loans and a five-year, €500 million green bond tune the categories of eligible projects leases for its electric, hybrid, and low- in June 2015 to support mortgages and disclosure and reporting aspects. Export Development Canada issued emission vehicles. The bond returns in energy-efficient homes, loans for Examples include the following: a three-year, US$300 million green are linked to the performance of these home solar panels, and sustainable bond in January 2014 to support direct consumer loans and leases.24 commercial property.26 loans in sectors that preserve, protect, Cities, States, and State-owned or remediate air, water, or soil or help YES BANK, India’s fourth-largest entities (Subnationals) mitigate climate change.19 Banks private sector bank, issued Rs 10 billion in 10-year green infrastructure British Columbia supported energy KfW Development Bank has issued Bank of America issued two green bonds in February 2015 to support its efficiency in new hospitals meeting green bonds since July 2014, including bonds—US$500 million in November renewable energy portfolio.27 Leadership in Energy & Environmental a five-year, €1.5 billion bond to finance Design (LEED) gold certification KfW’s environment investment program through a 32-year, Can$231 million including generation of renewable power, green bond issued in July 2014.15 especially from wind and photovoltaics.20 City of Gothenburg, together with Swedish bank Skandinaviska Enskilda Utilities Banken (SEB), developed a six-year, Skr 500 million green bond to finance The District of Columbia, Water and various environmental projects in public Sewer Authority (DC Water) issued transport, water management, energy, US$350 million in green bonds in July and waste management.16 2014 with a 100-year final maturity to finance a portion of its Clean Rivers City of Johannesburg issued a 10-year, Project.21 R 1.46 billion green bond in June 2014 to finance green initiatives such as the Biogas to GDF Suez, the French utility, issued the Energy Project, the Solar Geyser Initiative, largest-ever green bond—a €2.5 billion and other projects that will move the city (about US$3.4 billion) bond in May closer to a low-carbon infrastructure and 2014—to fund renewable energy projects.22 increase preservation of natural resources.17 Corporates State of Massachusetts issued two green bonds—a 20-year, US$100 million green Regency Centers Corporation, a real bond in June 2013 and a series of green estate investment trust, issued US$250 32 What are Green Bonds? II. Understanding Green Bonds 33 40 What has been the growth Figure 4 Green Bond Issuances, by Issuer Type, and composition of the green 2007–14 bond market? 35 Source: World Bank Treasury analysis based on Bloomberg data and other public sources. The market has grown from 30 about US$4 billion in 2010 to Energy and utility companies over US$37 billion in 2014. US$ equiv. billions Corporations and banks 25 As discussed earlier, the EIB issued tripled in 2013, as corporations, energy Other government entities or agencies the first climate-focused bond in the utilities, and other agencies entered the form of a structured product in 2007. In market, and several issuers drastically KfW Bankengruppe 20 2008, the World Bank issued the first increased the issue size (figure 4). This Other multilateral development banks (MDBs) bond labeled "green" for mainstream trend continued in 2014, when the investors with a fixed coupon. By green bond market volume rose to over European Investment Bank (EIB) 15 2010, they were joined for the first US$37 billion, over half of which was International Finance Corporation (IFC) time by other MDBs such as the IFC issued by corporations such as Toyota and by public entities (governments, and public entities such as the State World Bank (IBRD) 10 agencies, and municipalities) in issuing of Massachusetts. To date (mid-July a total of about US$4 billion worth of 2015), green bond issuances in 2015 climate-focused bonds. This total nearly have reached about US$23 billion. 5 0 2007 2008 2009 2010 2011 2012 2013 2014 Most investors have been investing announcements were made by in green bonds within their existing Zurich Insurance29 and Natixis Asset portfolios—responding to interest in Management's Responsible Investment supporting climate-focused activities. management company, Mirova,30 to set Asset managers have set up dedicated up portfolios dedicated to green bonds green bonds funds or have set targets in the magnitude of US$1 billion and for funds under management that €1 billion, respectively. In late 2014 and should include green bonds. For early 2015, the treasuries of Barclays example, Nikko Asset Management Bank31 and Deutsche Bank32 set up set up a World Bank Green Bond dedicated funds to invest ₤1 billion and Fund in 2010.28 A few years later, €1 billion in green bonds, respectively. 34 What are Green Bonds? II. Understanding Green Bonds 35 Who buys green bonds? How has the profile of Investment Sub-Investment issuers changed? Grade Grade or Unrated The main investors are As shown in figure 5, the green bond located in Europe, followed market from January 2014 to April 2015 Rating* AAA AA A BBB