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Mobilising Bond Markets for a Low-Carbon Transition

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This report describes the development of the green bond market as an innovative instrument for green finance, and provides a review of policy actions and options to promote further market development and growth. Since 2007-08, so-called “green bonds” have emerged and the market has risen from USD 3 billion in 2011 to USD 95 billion in issuance in 2016. For policy makers, the report proposes a framework for understanding potential directions of bond market evolution, increased convergence of rules and definitions, and quantitative analysis of the potential contribution that bond markets can make to a low-carbon transition.

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A quantitative framework for analysing potential bond contributions in a low-carbon transition

This chapter proposes a framework for understanding possible directions of bond market evolution and for analysing the potential contribution that the bond markets can make to a low-carbon transition. It lays out scenarios providing the first quantifications of debt financing, and bond financing in particular, that would be required in order to meet a 2oC energy investment scenario. Starting with energy investment requirements at the national level estimated by the International Energy Agency for its 2oC scenarios (2DS), the analysis converts investments into their constituent equity and debt components. Focusing on debt, the analysis considers the role that the bond markets will need to play to finance this investment and connect bond supply with demand from institutional investors.

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