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

S&P Global Ratings
Written By: Michael Ferguson, Nicole Martin, Michael Wilkins, Jessica Williams
S&P Global Ratings
Written By: Michael Ferguson, Nicole Martin, Michael Wilkins, Jessica Williams

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.

Overview

  • 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.

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