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Green Bonds: what contribution to the Paris Agreement and how to maximize it?

Green bonds are increasingly seen as of one of the key ‘green’ financial products aimed at financing assets compatible with a low-carbon and climate resilient economy. On the one hand, market actors are enthusiastic about the rapid growth of this new market – as well as the spotlight it drives on sustainable finance. However, on the other hand, some observers are concerned about two key challenges for the green bond market. First, the green bond market does not appear to directly stimulate a net increase in green investments, e.g. through a lower cost of capital. Second, the spontaneous bottom-up manner of the development of the green bond market raises reputational and legal risks related to its environmental integrity. In order to realize its full potential to contribute to the LCCR transition, the green bond market will therefore have to overcome these two challenges.