Despite a weaker than expected start to 2022, sustainable bond issuance continues to break new ground as it reaches a landmark $3 trillion total. Ahren Lester reports
Cumulative sustainable bond issuance has now crossed the $3 trillion milestone, with more than $2 trillion having been added since the start of 2020.
According to preliminary figures from Environmental Finance Data, total sustainable bond issuance – including green, social, sustainability, sustainability-linked and transition bonds – has now crossed $3 trillion. This includes more than $400 billion of bonds that have matured.
More than three-fifths of this issuance has been through green bonds, which kick-started the market in 2007. Meanwhile, social and sustainability bonds contributed more than a third of total issuance to date. Sustainability-linked bonds – which have experienced accelerating issuance since the Sustainability-Linked Bond Principles were published in 2020 – has contributed 5% of total issuance.
| Bond Label | Volume | Market Share |
|---|---|---|
| Green Bond | $1.89 trillion | 62% |
| Social Bond | $514.5 billion | 17% |
| Sustainability Bond | $483.5 billion | 16% |
| Sustainability-Linked Bond | $154 billion | 5% |
| Transition Bond | $8.5 billion | 0.3% |
| Total | $3.05 trillion | 100% |
| Source: Environmental Finance Data | ||
The total issuance figure was pushed across the $3 trillion with a number of large transactions being settled since the start of June, including a €5 billion ($5.1 billion) green bond from the EU and €4 billion sovereign green bond transactions from France and Germany.
Indonesia also recently raised $1.5 billion from a green bond, Bank of Beijing CNY9 billion ($1.3 billion) from green bond, and a $1.25 billion sustainability bond from the Asian Infrastructure Investment Bank.
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Meanwhile, other longstanding issuers also helped push the market across the milestone since the start of June. For example, German development bank KfW raised €4 billion from its latest green bond – just a couple of months after a €3 billion deal. In addition, Italian energy infrastructure firm Enel raised $3.5 billion from a multi-tranche sustainability-linked bond – a market it pioneered in 2019.
Some of the recent bonds have reiterated the position for several of the issuers among the largest sustainable bond issuers to date. After launching huge green and social bond programmes, the EU is now the largest sustainable bond issuer in the world.
Overall, the top 20 sustainable bond issuers to date is dominated by sovereign, municipal and agency issuers – but corporates including Enel and TenneT and financial firms including China Industrial Bank and BNG Bank also feature prominently.
Top 20 sustainable bond issuers by volume
| Issuer | Volume | First Issue |
|---|---|---|
| EU | $141 billion | 2020 |
| IBRD | $133 billion | 2008 |
| Fannie Mae | $129 billion | 2012 |
| Cades | $86.7 billion | 2020 |
| European Investment Bank | $66.6 billion | 2007 |
| KfW | $62.2 billion | 2014 |
| France | $52.5 billion | 2017 |
| Unédic | $32.4 billion | 2020 |
| Germany | $29.4 billion | 2020 |
| Chile | $29.1 billion | 2019 |
| Enel | $28.4 billion | 2017 |
| Société du Grand Paris | $27.8 billion | 2018 |
| Nederlandse Waterschapsbank | $26.9 billion | 2014 |
| UK | $24.7 billion | 2021 |
| State of North-Rhine Westphalia | $23.3 billion | 2015 |
| China Industrial Bank | $22.1 billion | 2016 |
| IADB | $21.8 billion | 2014 |
| TenneT | $19.1 billion | 2015 |
| BNG Bank | $18.6 billion | 2014 |
| International Development Association | $18.6 billion | 2020 |
| Source: Environmental Finance Data | ||
Reflecting the rapid growth in sustainable bond issuance in recent years, more than $2 trillion of this $3 trillion total has been issued since the start of 2020 – and more than $1 trillion in 2021 alone. As a result, more than $2.6 trillion of the cumulative sustainable bond issuance remains outstanding.
Alongside this immense growth since 2020, the period has also seen social, sustainability and sustainability-linked bonds build and consolidate their positions as major sustainable bond labels alongside green bonds.
Between 2012 and 2019, almost $9 in every $10 raised through sustainable bonds each year was through green bonds. Since the start of 2020, however, this has reduced to around $5 in every $10.
The journey from $2 trillion to $3 trillion, however, has been a little slower than some expected after the fixed income markets were hit by challenging conditions from late 2021. In the first six months of 2022, preliminary Environmental Finance figures indicate sustainable bond issuance is down around a third on that reported in the first six months of 2021 as concerns around rising inflation and interest rates and the Russian invasion of Ukraine weighed on the bond markets.
As a consequence, early market forecasts of further strong annual growth of the sustainable bond market in 2022 have been materially tempered.
Moody's ESG Solutions had originally forecast sustainable bond issuance to reach $1.35 trillion in 2022, for example. The credit agency has since cut this to forecast 2022 issuance volumes around the same $1 trillion level reported in 2021. Despite this, Moody's ESG Solutions sustainable finance vice president Matt Kuchtyak told Environmental Finance the slowdown reflects a "pause" rather than a "lengthy cessation" of sustainable bond issuance by organisations.
"It's important to note that, while our revised forecast is more of a bearish interpretation of where the market currently is, we anticipate this to be a short-term lull," Kuchtyak said.
"Our long-term expectations for growth in the sustainable bond market haven't changed," he said. "We can see that, across all regions and sectors, issuers are bringing the focus on sustainability into their capital market strategy. Over time, we will see a growing share of issuance across the globe that has some sort of sustainable label."
With more than $430 billion already raised through sustainable bonds in the first six months of 2022, however, the market remains broadly on course for another $1 trillion year – consolidating its position as an asset class of scale, and laying the groundwork for the $4 trillion milestone to be reached.