November 2024 – New York: The United States is reportedly closing in on record green bond issuance, with US$ 550 billion having been achieved by early November, this being reportedly close to the all-time high of US$ 588 billion attained in 2021. This represents a 13.5% year-over-year growth and has been attributable to significant contributions from corporate, governmental, and municipal issuers across the nation. Increasing commitment toward sustainable finance is reflected by the surge in sales of green bonds, even in the face of potential changes in policy.
California Community Choice Financing Authority ranks among the global leaders.
A recent and robust contributor to that growth has been the California Community Choice Financing Authority, which alone issued $6 billion in green bonds in 2024. Regarding issuance volume, the authority at least ranks among the world’s top ten green bond issuers, outperforming the entire country of China or Canada. California’s commitment of such an amount of funds to finance community-focused green projects speaks to a broader phenomenon in US municipal entities using green bonds to further advancement toward sustainability goals.
Green bond tactics around the country prove to be effective in that they help cities wring lower borrowing costs by attracting “greenium” — that is, a premium investors are willing to pay for environmentally friendly debt. Aviation department marketers are actively touting $383.5 million of sustainable bonds to finance Atlanta’s water system improvements. In so doing, Atlanta’s marketing of this set of bonds as environmentally friendly should attract financing at less expensive terms and complement the sustainability projects the city already has underway.
Policy Supports Investment in US Clean Energy
“The long-term outlook for US green finance remains solid,” says BNEF, as clean energy capacity is to triple to 2035, incorporating quadruple the amount of US solar, wind, and energy storage installations which may reach 1.1 terawatts by then — more than three times the total capacity added over the past decade. It’s in step with incentives offered under the Inflation Reduction Act, which, despite the murkiness in politics, will hold bipartisan economic appeal.
As policy associate Derrick Flakoll from BNEF reports, “The IRA plays a pretty critical role in the green transition,” adding, “It will likely continue to drive investment even if there are changes to the policy.”. “The clean power incentives in the Inflation Reduction Act will probably be too good for the economy to eliminate entirely,” said Flakoll, noting that even significant policy shifts would have clean energy forecasts reduced only by as much as 20%. The same view was shared by Enphase Energy Inc. CEO Badri Kothandaraman, who lauded the IRA’s effect to say that it is “creating jobs and bringing back manufacturing” to US shores.
US Sustainable Finance Resilience to Rate Pressures
Green bond issuance is only one piece of an expanding US sustainable finance market, which also encompasses sustainability-linked loans. In 2024, both JPMorgan and Bank of America reported more than $20 billion in sustainability-linked transactions, a number that reflects robust demand even in a higher-interest-rate environment. Companies are growing more comfortable composing transactions that can survive scrutiny for greenwashing, a factor that had limited some sustainable finance work to date.
In fact, the broad US sustainable debt market is proving resilient, coming in at $194 billion in Q3 2024. This places the US above supranational and the Chinese economies. Such does emphasize the domestic sustainability finance strength-of-the-US economy against change in its economic and policy context.
Bullish Sense on US Green Finance
US green bonds have continued to grow robustly even in a more challenging economic environment as Federal Reserve rates continue upward. Beneath the surface, this translates into unhindered momentum toward long-term sustainable goals. Policy support only has to gain with initiatives like the IRA, while innovative financing among municipal issuers could propel growth in local green projects.
The US green bond market is poised at the end of the year to challenge or even go beyond records it has set in its short history, testifying to the strength of sustainable finance in the face of both economic and environmental challenges. The US’s progress in this arena will likely set a model for countries seeking the fusion of economic growth with a sense of sustainability.