Is the bonds market shifting towards more sustainability?
Climate Bonds' 2022 « Global State of the Market » report provides a comprehensive overview of the sustainable debt market, highlighting trends in Green, Social, Sustainability, and Sustainability-Linked Bonds (GSS+), as well as transition bonds:
- The cumulative volume of GSS+, including transition bonds, reached USD 3.7 trillion by the end of 2022.
- In 2022 alone, the market saw USD 858.5 billion in new GSS+ volumes, a 24% decrease from the USD 1.1 trillion recorded in 2021.
- Green bonds remained the dominant theme, accounting for 58% of the total volume in 2022, with USD 487.1 billion issued. However, this represents a 16% year-on-year decrease.
- The social bond market experienced the most significant decline, with issuance dropping 41% year-on-year. This shift reflects a move away from COVID-19 recovery funding towards sustainability bonds.
- Transition bonds still represent a low volume of debt, but were the only category to show growth with a 5% year-on-year increase. This growth is attributed to strong policy support in China and Japan.
- Green and Sustainability-linked bonds (SLBs) are at a record high, but none of the £5.4bn raised with SLBs by oil and gas issuers had its KPI targets linked to scope-3 reduction targets.
- The market saw deals priced in 40 currencies, with the Euro accounting for 42% of the volumes, highlighting the significant role of European investors.
The report emphasises the importance of high-integrity commitments from buyers and robust, scientifically rigorous measurement and verification standards.
However, the year-on-year decrease in overall issuance volume in 2022 signals market challenges, including economic uncertainties and shifting investor priorities.
Critics may point out that the reliance on self-reported data and labels for classifying bonds could raise questions about the accuracy and consistency of the market analysis.