Green bonds

Green bonds

The market for green bonds is expanding owing to a variety of factors. The necessity of funding projects that have a favorable influence on the environment is becoming more apparent. Investor demand for green bonds has increased as a result of this. 

Additionally, governments and supranational organizations increasingly use green bonds to finance climate-related projects.  

What is a green bond? 

Green bonds are a type of debt instrument used to finance environmental projects. The proceeds from the sale of green bonds are used to fund projects with a positive environmental impact, such as renewable energy, energy efficiency, and pollution reduction.  

Green bonds are a type of debt instrument specifically earmarked for financing environmental projects. As such, they represent a key tool for mobilizing private capital for climate-related investments. Given the importance of these bonds in promoting sustainable development, it is critical to ensure that they are issued transparently and accountably. 

Types of green bonds 

Green bonds

Some of the categories of green bonds that can be offered on the market are listed below: 

  • “Use of Proceeds” Bonds 

This financial instrument is used to fund environmental initiatives, but the lenders may access the issuer’s other assets in the liquidation scenario. The same credit rating as the issuer’s other bonds applies to these instruments. 

  • Asset-backed securities (ABS) or “Use of Proceeds” Revenue Bonds 

These bonds can be used to refinance or fund green projects, but the debt is secured by streams of income that the issuer collects, such as taxes or fees. When issuing green bonds, state and local organizations could choose to use this kind of framework. 

  • Project bonds 

This kind of bond only applies to a certain underlying green project. Therefore, investors’ liability is restricted to the project’s assets. 

  • Securitisation bonds 

These debt instruments consist of a collection of projects merged into one debt portfolio, including bondholders having access to the assets supporting the whole collection of projects.  

  • Covered bonds. 

This financial instrument entails funding a collection of eco-friendly initiatives known as the “covered pool”. Investors can seek redress from the issuer in this situation, but if the issuer fails to fulfill debt payments, bondholders can seek redress from the covered pool. 

  • Loans 

Loans for green projects can be either unsecured or secured. Lenders have complete recourse to the borrower’s assets while making unsecured loans. When making a secured loan, the lender may have some partial recourse against the borrower and the collateral. 

Main uses of green bonds 

Governments, corporations, or financial institutions can issue green bonds. They are typically used to finance long-term projects with a horizon of 5-10 years.   

The green bonds market has grown rapidly in recent years, with over $250 billion worth of green bonds being issued in 2017 alone. This growth is expected to continue as more investors seek to invest in environmentally friendly projects. 

Advantages of green bonds 

The key advantages of green bonds include the following:  

  • Green bonds can help to unlock new sources of capital for climate-related projects.  
  • They can assist in letting the market know how committed the issuer is to tackling climate-related problems. 
  • Green bonds can help to generate positive publicity for the issuer.  
  • They can help to attract new investors who are interested in climate-related issues.  
  • Green bonds can help to create a market for climate-related projects.  
  • They can help to increase transparency and disclosure around climate-related issues. 

Challenges of green bonds 

While the concept of green bonds has been around for several years, the market for green bonds has only begun to develop in recent years. Several challenges need to be addressed for the green bond market to grow. 

One of the key challenges is the lack of a standardized definition for green bonds. Another challenge is the lack of data and transparency around green bond issuance. This lack of data makes it difficult for investors to assess the risks and opportunities associated with investing in green bonds. 

Despite these challenges, the green bond market is expected to grow in the coming years. The necessity to fund environmental projects and investors’ desire to support such projects contribute to this expansion. 

Frequently Asked Questions

Governments and corporations issue green bonds to raise capital for environmental projects. Investors who purchase green bonds receive interest payments from the issuer, and the principal is returned at maturity. The terms of green bonds are similar to traditional bonds, but the proceeds must be used for eligible environmental projects.  

Green bonds can be an important tool for funding the transition to a low-carbon economy. By directing capital to environmental projects, green bonds can help reduce greenhouse gas emissions, promote the use of renewable energy, and protect natural resources. 

Green bonds are a debt instrument specifically used to finance environmental projects. Blue bonds, on the other hand, are a type of debt instrument used to finance projects that positively impact the oceans. 

The proceeds from the sale of green bonds are used to fund projects with a positive environmental impact, such as renewable energy, energy efficiency, and pollution reduction. In contrast, the proceeds from the sale of blue bonds are used to fund projects that improve the health of the oceans, such as marine conservation, sustainable fisheries, and pollution reduction. 

The global green bonds market has been growing rapidly in recent years, and the forecasted market value is anticipated to rise to USD 615 billion by 2025. Governments and supranational organizations like the World Bank issue most green bonds.  

In the upcoming years, the market for green bonds is anticipated to expand. This will be driven by the increasing awareness of the need to finance projects with a positive environmental impact and the continuing efforts of governments and supranational organizations to finance climate-related projects. 

The first step in verifying a green bond is to check that a reputable institution has issued it. The issuing institution should be a member of the Climate Bonds Initiative (CBI), an international not-for-profit organization that promotes the development of the green bonds market.  

Once you have verified that a reputable institution has issued the bond, you should check the documentation to see what the bond is financing. The documentation should contain a clear and concise description of the project and the expected environmental impacts. It should be treated with caution if the documentation is unclear or incomplete. 

Finally, you should check to see if a third party has independently verified the green bond. The Climate Bonds Initiative maintains a list of approved verifiers, which can be found on its website. If an approved verifier has not verified the bond you are considering, it is best to proceed cautiously. 

Governments, companies, or financial institutions can issue green bonds. For example, the World Bank has issued green bonds to finance climate change mitigation and adaptation projects, and the City of London has issued green bonds to finance installing solar panels on public buildings.  

Green bonds are one way to encourage investment in environmentally friendly projects. By directing funds to these projects, green bonds can help reduce greenhouse gas emissions, pollution, and other environmental impacts. 

    Read the Latest Market Journal

    Weekly Updates 4/3/24 – 8/3/24

    Published on Mar 4, 2024 16 

    This weekly update is designed to help you stay informed and relate economic and company...

    Weekly Updates 26/2/24 – 1/3/24

    Published on Feb 28, 2024 61 

    This weekly update is designed to help you stay informed and relate economic and company...

    All-in-One Guide to Investing in China via ETFs

    Published on Feb 27, 2024 391 

    Start trading on POEMS! Open a free account here! Why China? In the vast landscape...

    Navigating the Post-Inflation Landscape in 2024: Top 10 US Markets Key Events to Look out for

    Published on Feb 23, 2024 393 

    Start trading on POEMS! Open a free account here! In 2023, the United States experienced...

    From Boom to Bust: Lessons from the Barings Bank Collapse

    Published on Feb 23, 2024 62 

    Barings Bank was one of the oldest merchant banks in England with a long history...

    Decoding FX CFD 2.0

    Published on Feb 20, 2024 69 

    This article is aimed at availing information and knowledge essential to intermediate forex traders. It...

    Weekly Updates 19/2/24 – 23/2/24

    Published on Feb 19, 2024 89 

    This weekly update is designed to help you stay informed and relate economic and company...

    Unlock Prosperity with 5 Sure-Fire Financial Instruments!

    Published on Feb 14, 2024 200 

    In Singapore, the concept of guaranteed returns may evoke the spirit of prosperity, reminiscent perhaps...

    Contact us to Open an Account

    Need Assistance? Share your Details and we’ll get back to you


    This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

    An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

    Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

    Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

    The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <> for more information in relation to the dividend distributions.  

    The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

    The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

    This advertisement has not been reviewed by the Monetary Authority of Singapore.  


    Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
    250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
    Tel: (65) 6230 8133 Fax: (65) 65383066