While only two sovereigns to date—Poland and France—have issued a green bond, many have created, or are in the process of creating, legislative frameworks that will make it easier to issue green bonds in the future as they realize that they provide an opportunity to tap into new pools of capital and to meet their international environmental obligations.
For China and India, it is not a matter of whether but when they will issue a sovereign green bond. Both countries have been vocal in their commitment to meeting the 2020 greenhouse gas targets set out in the Paris Agreement on climate change, and both have worked with international bodies to develop frameworks aligned with the global green bond market.
After recognizing the gap in funding required to reach national commitments under the Paris Agreement, the Brazilian Federation of Banks and the Brazilian Business Council for Sustainable Development in 2016 published guidelines for issuing Brazilian green bonds.
Compelled by access to cheap long-term money from a wide pool of investors, emerging market sovereigns such as Nigeria and Morocco are beginning to weigh this financing option as green bonds are more mainstream instruments.
The Singaporean government is putting in place a Green Bond Grant regime, which recognizes the small additional financial burden of making a bond green, nullifying the disparity through a subsidy. In addition, the Financial Services Authority of Indonesia is set to launch a green bond regulatory framework any day.
Although sovereign green bonds are on the rise, there remain strong reasons for issuing at a sub-sovereign level. For example, Sweden—although among the greenest of nations—has not yet issued a sovereign green bond because the strength of its economy is such that its government does not require debt finance at the sovereign level.