Bank of America’s Moynihan sees strong demand for green debt

Demand for green bonds and other financing tied to climate and environmental projects is growing and should expand further, said Bank of America chief Brian Moynihan.

“It’s a pretty amazing thing to see how much capital is coming in, and yet we’re just getting started,” Moynihan said at the IIF Sustainable Finance Summit on Thursday. “You’re going to see a lot of action.”

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Bank of America is an issuer and and underwriter of the debt for corporate clients as they move toward clean energy and technology. “Companies need to issue more green bonds,” which ultimately “backs the strength of their commitment,” Moynihan said.

Corporations can access capital in the green debt market to help make their transition to lower carbon emissions. That borrowing can pay higher rates to investors, which can create more demand to provide that financing, the chief executive said on the virtual panel.

Companies and governments globally have raised about $94 billion in green bonds so far this year, according to data compiled by Bloomberg. That’s a record pace and surpasses the more than $86 billion borrowed in the same period last year. Bank of America has been involved in about 4.5% of this year’s sales worldwide, making it the second-biggest underwriter of the bonds behind BNP Paribas, according to Bloomberg rankings.

Sales include Honda Motor’s $2.75 billion in green bonds to help the Tokyo-based automaker’s production of electric cars. Bank of America helped manage that sale, one of the largest green bonds to be issued by a corporation in the U.S. high-grade market.

Moynihan says that the focus should be on companies’ commitment to transition to clean energy, not just the financing.

“There is a mistake thinking that finance somehow controls this outcome,” he said. “Finance is going to reflect this outcome. It can help educate, advise, create deals, create activity and structure.”

Global issuance of green bonds — the largest category of sustainable debt by dollar volume — reached a record $513 billion last year, according to data compiled by Bloomberg. Climate Bonds Initiative, a London-based organization that sets green bond standards, estimates annual sales could reach fresh highs of between $900 billion and $1 trillion by the end of this year — and as much as $5 trillion by 2025.