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WHAT IS THE POTENTIAL OF GREEN BONDS TO RAISE MORE CAPITAL?

Experts have estimated the amount of financing that is needed to support this transition. The estimates vary, but all agree that the financing gap cannot be covered by public sources alone.
(GCEC Global Commission on the Economy and Climate, "Better Growth, Better Climate: The New Climate Economy Report," The Synthesis Report (Washington, DC: GCEC, 2014). The New Climate Economy Report estimates that that an average of US$6 trillion per year will be spent in infrastructure over the next 15 years, and that an additional US$270 billion per year would be needed to make a transition to low-carbon economy.)
(World Economic Forum, "The Green Investment Report: The Ways and Means to Unlock Private Finance for Green Growth," (Geneva: World Economic Forum, 2013). Another estimate by the World Economic Forum indicates that the average infrastructure spending of US$5 trillion per year could be “greened” with an additional US$700 billion to US$1 trillion.
Private financing already accounts for about 60 percent of the estimated flows supporting climate action.
(CPI Climate Policy Initiative, "The Global Landscape of Climate Finance 2014," CPI Report, November 2014).

Most green bonds issued so far are part of the overall funding program of issuers. For example, MDBs have provided about US$42 billion in loans for low-carbon and climate-resilient projects. To the extent that a portion of the MDB funding for these loans was raised from capital markets in the form of green bonds, MDBs are already part of the existing climate funding sources.

The market for green bonds is still at an early stage, but as the range of investors is growing, so could the variety of bonds being offered. This includes, for example, bonds of different issuers that carry higher risk but yield higher returns, bonds in currencies of more countries, and bonds with returns linked to revenues of specific projects. The larger this variety becomes, the higher the potential for green bonds to help raise more private capital to support environmental and climate-friendly investments. Of course, green bonds are only one instrument in the menu of financing innovations that can be developed. Other instruments may be more suitable, particularly in countries with less-developed capital markets. The World Bank Group works to develop financing structures that enhance the attractiveness of climate investments and, more broadly, to deepen local financial markets.