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Green America: The Prospects For The Development Of The Green Bond Market In The U.S.

S&P Global Ratings

COP24 Special Edition Shining A Light On Climate Finance

S&P Dow Jones Indices

Considering the Risk from Future Carbon Prices

S&P Global Ratings

Plugging the Climate Adaptation Gap with High Resilience Benefit Investments

Empowering Public Private Collaboration in Infrastructure

Green America: The Prospects For The Development Of The Green Bond Market In The U.S.

By mid-2017, American corporate issuers had already gone to market with approximately $18 billion of green bonds, while municipal issuers had issued about $18 billion as well, cumulatively. This number increased sharply from previous years, and we anticipate the final 2017 tally to be higher still. However, in the grand scheme of things, the U.S. still boasts a relatively small share of cumulative green bond issuances worldwide (about $221 billion outstanding as of summer 2017), and the U.S. total is dwarfed by the wider universe of domestic debt issuance. But, curiously, all this comes as the U.S. continues to see dramatic reductions in carbon emissions and while a mass transformation of the American generating grid continues.


  • Despite significant interest in renewable energy in the U.S., the green bond market has remained relatively small.
  • A lack of near-term clarity on regulatory policy may be contributing to this limited growth.
  • However, longer term, we believe there are favorable trends that could signal the growth of the green bond market.
  • To date, we have performed Green Evaluations for five issuances in the U.S., but not all are actually labelled green bonds.

Challenges In The U.S.

Despite substantial growth in the green bond market abroad, specifically in Europe and China, the market domestically has struggled to take form for a variety of reasons, but we note that some of these could change in years to come with new developments in the market.

First, whereas EU nations have long benefited from a transparent and enduring carbon reduction framework, the U.S., at least on a federal level, has had its debate on climate change mitigation characterized by partisan disagreement. With political partisanship belying the scientific consensus on the cause of and dangers faced because of climate change, it has remained difficult to establish a cohesive set of principles for carbon mitigation and adaptation. The failure of the Waxman-Markey Bill in 2009 led to an increased politicization of climate change, which has ultimately slowed progress toward a successful resolution.

COP24 Special Edition Shining A Light On Climate Finance


− Green loans are evolving, with the Climate Bond Initiative forecasting nearly $1 trillion in green bond issuance by 2020.

− Despite the uptick in green bond and loan issuance, the market still remains relatively small, especially compared to the universe of assets comprising CLO 2.0 transactions.

− In our view, a green CLO market has large growth potential, boosted by regulatory initiatives and emerging interest from both issuers and investors in 2018.

− We built a hypothetical rating scenario for a green CLO to compare and contrast the underlying portfolio and structure with a typical European CLO 2.0 transaction.

− Our hypothetical green CLO analysis showed that green loans may have different fundamental characteristics to corporate loans, such as lower asset yields, higher credit quality, and higher recovery rates assumptions.

The global collateralized loan obligation (CLO) market has experienced a rebirth (2010 in the U.S. and 2013 in Europe). New issuance continues to increase due to investor familiarity with the product, as well as low historical default rates. While a market for green assets, such as green loans and bonds has been established for a while, although still of a relative size, a sustainable securitization market is still in its infancy. Considering the challenge in financing the amounts, S&P Global Ratings expects green CLOs to play a role in increasing the private sector presence in the sustainable finance market.

Following the Paris Agreement that came into force in November 2016, 184 parties have ratified the action plan to limit global warming. For this purpose, developed nations have pledged to provide $100 billion (about €87 billion) annually until 2025. As part of this deal the EU has committed to decrease carbon emissions by 40% by 2030. In March 2018 the European Commission (EC) proposed the creation of environmental, social, and corporate governance 'taxonomy', regulating sustainable finance product disclosures, as well as introducing the 'green supporting factor' in the EU prudential rules for banks and insurance companies.

Read the Full Report

Considering the Risk from Future Carbon Prices

Along with the advent of the 2015 Paris Climate Agreement has come a growing understanding of the structural changes required across the global economy to shift to low- (or zero-) carbon, sustainable business practices.

The increasing regulation of carbon emissions through taxes, emissions trading schemes, and fossil fuel extraction fees is expected to feature prominently in global efforts to address climate change. Carbon prices are already implemented in 40 countries and 20 cities and regions. Average carbon prices could increase more than sevenfold to USD 120 per metric ton by 2030, as regulations aim to limit the average global temperature increase to 2 degrees Celsius, in accordance with the Paris Agreement.

S&P Dow Jones Indices launched the S&P Carbon Price Risk Adjusted Indices to embed future carbon price risk into today’s index constituents.

Read the Full Report

Plugging the Climate Adaptation Gap with High Resilience Benefit Investments


- Adaptation financing needs to substantially increase to address the higher impact of extreme weather to society due to climate change.

- Adaptation projects are typically cost effective and bring wide range of resilience benefits.

- To demonstrate the value of resilience benefits to various stakeholders we consider that it is important to quantify those benefits based on a robust modeling framework.

- We expect that due to the large size of the adaptation gap and constrained public finances,private investment would need to make a considerable contribution to adaptation financing.

Dec. 07 2018 — We believe the recent surge in economic damage from extreme climatic events may focus the attention of public authorities about the need for adaptation investments and accelerate investment in this area.The United Nations Environment Program (UNEP) forecasts adaptation costs in developing countries at between $140 billion and $300 billion by 2030, and $280 billion and $500 billion by 2050. That is approximately 6x-13x above the amount of international public-sector finance available today--just to meet 2030 costs.

Over the last two years,the world has seen a flurry of extreme weather, which has exposed the vulnerability of many countries to these events. Climate change may make matters worse, irrespective of whether we manage to keep global warming to 2 degrees Celsius or not. Attention to climate change adaptation is therefore increasing, especially about how to finance it, given the need to raise enough public and private investment to fortify exposed countries and communities against the potentially devastating effects of physical climate risk.

Read the Full Report

Watch: Empowering Public Private Collaboration in Infrastructure

S&P Global CEO Doug Peterson speaks with Maha Eltobgy from the World Economic Forum, on their joint study that looks at how greater collaboration between the public and private sector can accelerate national infrastructure programmes.