Green bonds have a significant advantage over fossil-fuel debt transactions

For the first time, firms and governments are borrowing significantly more money for ecologically friendly initiatives than for fossil fuels.

According to a Bloomberg report, green bond sales and loan agreements raised about $350 billion in the initial half of this year, compared to less than $235 billion in oil, gas, and coal-related finance. In the same period last year, the ratio was around $300 billion green vs $315 billion fossil fuels.

“It’s too early to say whether this is good news,” April Merleaux, study coordinator at the environmental nonprofit Rainforest Action Network, said. Much of this year’s green issuance comes from financial institutions, governments, a few utilities, and a few renewables companies, and it’s unclear how all of this money is being used and what this implies for the energy transition, according to Merleaux.

Consider RWE AG. This year, the German utility raised $1.1 billion through the sale of green bonds. The funds, according to the business, would be used for wind and solar power projects. However, RWE is Europe’s largest greenhouse gas producer and an important coal developer, according to Merleaux.

According to Jaimin Patel, senior credit analyst at Bloomberg Intelligence, the cash flow generated (and projected to continue) by oil refiners is so strong that they will likely not need to tap fixed-income markets to fund operations or meet debt maturities.