Policy Creates New High Against the Wind: Global Green Bond Issuance Approaches $1 Trillion, AI and electricity demand become new engines.

Despite tightening policies and regulations in the United States and Europe, investors have been pouring into climate-friendly assets this year as artificial intelligence drives prosperity in energy infrastructure demand. According to data, global issuance of green bonds and green loans has reached a record $947 billion so far this year. At the same time, stock market indicators for renewable energy are expected to see their first annual increase since 2020, outperforming the S&P 500 index, and stocks of grid technology companies continue to be favored. These flows of funds have been particularly prominent this year, as U.S. President Trump supports fossil fuels and has canceled clean energy subsidies and legislation. Europe has also relaxed some of its strictest environmental rules out of concerns for increasing competitiveness. However, driven by artificial intelligence, cooling, and electrification needs, global electricity demand is expected to grow by nearly 4%, coupled with clearer policy signals that are boosting investor optimism. "Green investments are increasingly seen as core infrastructure and industrial investments, rather than just niche ESG transactions," said Melissa Cheok, Deputy Director of ESG Investment Research at Sustainable Finance. According to data, APAC businesses and government-related issuers have raised $261 billion in green debt, about a 20% increase from the same period last year, benefiting from the support for renewable energy deployment in China and India. China set a record with $138 billion in green bond issuance, with major issuers being domestic large banks. China also issued its first sovereign green bond earlier this year in London. The "green premium," or lower borrowing costs for green bonds, is most pronounced in the APAC region. In November, some issuers received over a 14 basis point rate discount for using green labels. Companies typically issue green bonds to raise funds for transitioning to renewable energy or low-carbon transport. According to data, BNP Paribas and Credit Agricole have been the main underwriters of green bonds this year. Research by the LSE Group last month showed that outstanding green bonds have grown at a 30% compound annual growth rate over the past five years, currently accounting for about 4.3% of the global bond issuance volume. Crystal Geng, Head of ESG Research for Asia at BNP Paribas Asset Management, said that a decline in U.S. interest rates and refinancing needs could push global green bond sales next year to $1.6 trillion. Green stocks have been leading the market this year. The S&P Dow Jones indices and WilderShares clean energy index have surged by 45% and 60%, respectively, although they remain below their peak in 2021. U.S. CECEP Solar Energy and battery storage stocks, including SolarEdge Technologies Inc., have been among the top performing stocks, while wind turbine manufacturers have led gains in China and Germany. India has become a hot spot for renewable energy IPOs, with 11 companies raising over $1 billion through listings, and another 6 seeking over $3 billion. Last year, 14 renewable energy companies raised $2.4 billion through IPOs. Not all markets have benefited from this trend. Green debt issuance in the U.S. has fallen by 7% this year to $163 billion, while sales of national bonds also saw a similar decline. Germany's fundraising volume has been stable at around $79 billion. Jeanne Soh, Head of Structured Financing for Asia at Sumitomo Mitsui Banking Corporation, said that despite a record $7 billion in green loans in India, strong interest from foreign banks has heightened competition, squeezing financing margins for projects like renewable energy by 5% to 10%. Sales of bonds linked to sustainable development plummeted by about 50% this year to $165 billion due to concerns about "greenwashing." Issuance of transition bonds for hard-to-decarbonize industries decreased by over half to $10.9 billion. Xuan Sheng Ou Yong, Portfolio Manager of Sustainable Investment for Robeco in Singapore, said these trends could reverse in the next two years. He noted that changes to European fund rules will allow asset managers to define sustainable investment themselves, opening the door for investments in emission reduction in industries with higher pollution. Overall, global sustainable debt has fallen by over 8% to about $1.6 trillion this year compared to 2024. On the other hand, the U.S. has sold over $500 billion in social bonds linked to Ginnie Mae, which guarantees the principal and interest of mortgage-backed securities.