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Trade war and currencies spell lower green bond issuance

US_vs_ChinaBrexit and increased trade tensions could cause a short-term dip in the issuance of green bonds, the Swedish bank SEB said.

Christopher Flensborg, head of climate and sustainable financial solutions at SEB, said uncertainty around the UK departure from the EU, coupled with trade tensions, were creating an increased risk for currencies, which could impact green bond issuance.

In the second quarter of this year, green bond issuance reached its second highest quarterly figure with $47 billion of issuance - a 21% rise year-on-year - and Flensborg said the outlook was still positive, with total issuance possibly reaching $185 billion for the year.

However, the overall bond market has slowed due to “fickle market conditions” holding back issuance globally, said SEB in its ‘The green bond’ report.

According to the report, in the first half of the year green bond issuance shifted towards bonds denominated in euros, reaching 46% at one point before falling back to 43% for the six-month period. The trend was driven by strength in the euro-denominated corporate bond market and saw a range of corporates and sovereigns favour the currency.

Year-to-date green bond issuance in US dollars reached 32%, while SEB also noted that the percentage of all green bonds issued in Swedish krona “surged” to a world record of 16% in the second quarter, up from 6.6% over the course of 2017.

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