India to lead green bond market in Asia: Moody's

NEW DELHI: India has come up as an early leader in Asia's incipient green bond market and is expected to be a prominent driver of regional issuance in coming years, Moody's Investors Service today said.

"India has established itself as an early leader in Asia's nascent green bond market, with three India-based issuers coming to market in the third quarter(July-Sept)", Moody's senior Vice President Henry Shilling said in a statement.

"We expect India, along with China, to be a prominent driver of regional issuance in coming years, given ambitious targets on building out renewable energy capacity," Shilling said.

India has set a target of 175 GW of renewable energy capacity by 2022.

Moody's further said that global green bond issuance reached $ 7.5 billion in the third quarter of 2015, lifting year-to-date green bond issuance to $ 27.2 billion.

Though down from Q2, Moody's expects issuance will pick up in the last quarter (October-December) and exceed $ 40 billion for the full year 2015.

"Issuance continued to break new ground in the third quarter in terms of noteworthy and first-time transactions, such as the first green bond transaction by a Chinese issuer," Shilling said.

Moody's conclusions were contained in its just-released report on the global green bonds market -- 'Third Quarter Issuance Lags, but COP21-Linked Increase Is Likely.'

The report further said that nearly half of the third quarter's issuance proceeds or about $ 4 billion are being earmarked for renewable energy projects. This is followed by 18.8 per cent or about $ 1.7 billion earmarked for sustainable water management followed closely by $ 1.6 billion allocated to energy efficiency projects.

Investment-grade issuance continued to dominate in the third quarter but high-yield green bonds gained as a share of all Moody's-rated green bond transactions, it said.

Nearly 18 per cent of issuance in the third quarter was attributable to below-investment grade issuers, up from just 5 per cent in the second quarter, it added.

Furthermore, green bond performance registered a slight gain in the third quarter.

The July-September period also saw more standard-setting initiatives aimed at bolstering green bonds standards as well as issuance, it said.