Advantages And Disadvantages Of Green Bonds

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Climate Change is one of the 21st century’s major challenges, and now a financial instrument “Green Bonds” is making it easier for companies and investors to do their part in helping the environment. It is a bond that is issued by a government or a company that promises a return in the future with interest to invest in projects and only projects that are environmentally friendly. Green bonds, or otherwise known as Climate Bonds, have seen a rise in the bond market since 2007, with more private and national investors entering the market. This article provides an overview of the green bonds market and highlights the advantages and disadvantages of investing in green bonds. Green Bonds Characteristics Green bonds are like any other bond that…show more content…
Looking at it from the issuer perspective, green bonds could be more costly than the regular bond as they require some expenses that relate to the assessment of the final project. In addition to that, green bonds returns for investors are small compared to others because of how small the market is with little liquidity as most green bonds mature in three to seven years. Constance commented on this by stating that “ they are strictly buy and hold bonds,” which means that the investors can not resell their bonds as soon as they buy it…show more content…
This idea is supported by Khanduja who states that; “There is no solid definition of green worldwide” (Citation). This makes it hard for projects to be categorized as green. Despite the World Bank monitoring the process of investing oin green bonds, there is still the question of transparency. As the green bond market is on the rise investors are questioning of whether their investment is actually invested on a green project and whether there is a strict evaluation of the way that the bond is invested Finally, projects such as forestry, agriculture and fishing are going to be underfinanced as the green bond market is skyrocketing with investors that are looking for a cleaner and greener earth. This would mean that other alternative methods of investments would have to be discovered for these projects in order for them to succeed as investors are switching sides and preferring green investments to harming the earth.

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