August 6, 2018 / News

Trade war threatens green bond issuance, report claims

By Joe McGrath, ESG Clarity

Protectionist trade policies and the UK’s imminent departure from the European Union threaten to dampen issuance levels of green bonds, new research suggests.

Trade war threatens green bond issuance, report claims

Protectionist trade policies and the UK’s imminent departure from the European Union threaten to dampen issuance levels of green bonds, new research suggests.

In a statement accompanying its Green Bond report, the Nordic corporate bank SEB warned that ongoing uncertainty relating to Brexit and escalating trade tensions between China and the United States were “increasing risk on currencies” and could lead to a reduction in green bond issuance levels.

The report, written by Christopher Flensborg, head of Climate & Sustainable Financial Solutions at SEB, noted that “the overall bond market has slowed in 2018 and fickle market conditions have held back issuance globally in July taking the whole market to $87 billion year-to-date (up only 6%).”

Flensborg explained that activity was continuing to be affected by news of interest rate hikes and “market reaction to the current political environment.”

In his analysis for the second quarter of 2018, Flensborg said that the bond market had “returned to its more serrated pattern of issuance and growth” during the quarter, after what had been “a weak spot” in May.

In fact, the market saw its second highest quarterly issuance figure to date of $47 billion, which represented growth of +21% compared to the same quarter in 2017.

In July, the bond market as a whole saw issuance slow, however. The report stated that issuance levels were “looking to be down by at least 40%” compared to July 2017.