So-called green bonds have become more popular in recent years, and this fast-growing segment of the $128.3 trillion global bond market could grow even more.
When an issuer sells a green bond, they're making a nonbinding commitment to earmark the sale's proceeds for environmentally friendly projects. That could include renewable energy projects, constructing energy efficient buildings or making investments in clean water or transportation.
Green bonds fall under the wider umbrella of sustainable bonds, which include fixed-income instruments whose proceeds are set aside for social or sustainability projects.
Big household names such as Apple and PepsiCo are diving into this space. A handful of massive banks and governments around the world are also issuing sustainable bonds, including China, Russia and the European Union.
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This may be contributing to the space's rapid growth. A report from Moody's said new sustainable bond issuance may top $650 billion in 2021. That would represent a 32% jump from 2020.
Watch the video above to learn more about how green bonds work, how issuers can be held accountable and how green bonds can move capital toward climate-friendly projects and goals.