Transforming Green Bond Markets: Using Financial Innovation and Technology to Expand Green Bond Issuance in Latin America and the Caribbean

Despite exhibiting remarkable growth, the green bond market still represents less than 1 percent of the global bond market. This paper identifies two challenges that might slow the adoption of green bonds and presents a menu of responses that policymakers, regulators, and public financial institutions can use to offset these challenges. Specifically, it explores two key dimensions: (i) the risk profile of the green bond instrument and (ii) the transaction costs associated with issuance of and reporting on green bonds. New approaches to risk design and technology-based approaches are essential to untap the potential of green bond markets, particularly in Latin America and the Caribbean and other developing regions. The incorporation of financial mechanisms such as covered bonds and guarantees can adequately address the risk of the issues, making the market more attractive for investors. Enhanced regulation and education and leveraging efficiencies of new technologies such as distributed ledger technologies can substantially reduce monitoring and reporting costs, while improving transparency in the use of proceeds and market integrity.

Bibliographic Details

Main Author:	Inter-American Development Bank
Other Authors:	Juan Antonio Ketterer
Language:	English
Published:	Inter-American Development Bank
Subjects:	Green Finance, Renewable Energy, Green Bond, Green Infrastructure, Financial Market, Z00 - Other Special Topics: General: General, Q00 - Agricultural and Natural Resource Economics • Environmental and Ecological Economics: General: General, G00 - Financial Economics: General: General, green bond; green bond market; green bond proceeds; renewable energy; financial mechanisms; financial market; covered bonds; guarantees; transparency; use of proceeds; market integrity; green investment; capital market development; green bond instrument; reporting on green bonds; green investors,
Online Access:	http://dx.doi.org/10.18235/0001900 https://publications.iadb.org/en/transforming-green-bond-markets-using-financial-innovation-and-technology-expand-green-bond
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