Green bonds are debt instruments issued exclusively to fund environmentally beneficial projects — renewable energy, clean transportation, energy efficiency, sustainable water management, pollution prevention, and green buildings. The money raised cannot be used for anything else.
The green bond market has exploded from $11 billion in 2013 to over $600 billion in annual issuances by 2024. Major issuers include the European Investment Bank, World Bank, Apple (issued $4.7 billion in green bonds), and the Indian government (which issued its first sovereign green bond in 2023).
Green bonds often price at a slight discount (the "greenium") — meaning investors accept slightly lower yields because they value the environmental impact. Independent verifiers certify that proceeds are used as promised. The Climate Bonds Initiative sets global standards for what qualifies as a green bond.