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 USD 7.5 billion in the third quarter of 2015, lifting year-to-date green bond issuance to USD 27.2 billion.

Though down from Q2, Moody's expects issuance will pick up in the last quarter (October-December) and exceed USD 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 USD 4 billion are being earmarked for renewable energy projects. This is followed by 18.8 percent or about USD 1.7 billion earmarked for sustainable water management followed closely by USD 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 percent of issuance in the third quarter was attributable to below-investment grade issuers, up from just 5 percent 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.