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European governments are increasingly driving growth of the fledgling green bond market, says DBRS Inc.

In a new report, the Toronto-based rating agency said European sovereigns are ramping up their issuance of green bonds, with three governments (Belgium, Ireland and Lithuania) entering the market with new offerings for the first time last year, and one government expected soon to enter (the Netherlands).

Overall, global green bond issuance grew by 6% in 2018, the report said, while European issuance rose by 15%, representing 40% of global issuance. And governments are becoming bigger players in the market.

European sovereign green bond issuance increased by 52% year over year in 2018, DBRS said, noting that this issuance accounted for about 1% of total European government bond issuance.

“Although still modest in scale, sovereign green bonds are meeting a growing demand from investors with an environmental mandate and a long-term investment horizon, thus helping to deepen the market for ‘green’ finance,” the report said. It also detailed associated benefits for governments.

“In addition to helping deepen the market for sustainable finance and supporting the achievement of climate goals, sovereign green bonds can help governments diversify their investor base and lengthen debt maturity profiles,” it said.

DBRS also said it expects more European sovereign green bonds to be issued in the coming years “as efforts to implement solutions to climate change continue.”