21 June 2024

SLBs: 2024 issuance slumps as issuer wariness grows

Sustainability-linked bond (SLB) issuance in 2024 is running at around half the volume reported in 2023, with issuers – both old and new – largely eschewing market.

According to Environmental Finance Data, SLB issuance in 2024 to date is just $18 billion – just over half the $34 billion raised through the performance-based instrument during the same period in 2023.

SLB issuance volume by year

Assuming a similar pattern of SLB issuance for the remainder of 2024 as in 2023, this means that total 2024 SLB issuance could reach just $35 billion for the whole year. This would be considerably weaker than expert forecasts at the beginning of the year of between $60 billion and $80 billion.

This would represent a significant decline in annual issuance after two consecutive years in which annual SLB issuance volumes have contracted, with 2023 issuance volumes down a third on the record $95 billion raised in 2021.

The biggest SLB issuer in 2024 to date is Italian energy infrastructure firm Enel which has raised $3.9 billion, followed by fellow Italian firms Autostrade per L'Italia, a road operator, and Snam, an energy firm who have raised around $1 billion each.

In recent years, despite the fall in annual issuance volumes, the number of unique issuers of the instrument has remained fairly stable at around 190 since the record-breaking 2021. In 2024, however, the total number of unique SLB issuers has also fallen to just 56 issuers in 2024 to date – down a third on the same period in 2023.

The decline in new issuers entering the SLB market in 2024 has been even more pronounced.

With the Sustainability-Linked Bond Principles (SLBP) only published in 2020, the formal SLB market is still very young. Yet, Environmental Finance research shows that only 19 new SLB issuers have entered the market in 2024 – down from 39 over the same period in 2024. This means just a third of SLB issuers in 2024 to date are new to the market, down from around half in 2023.

New SLB issuers in 2024 include Italian transport infrastructure company Mundys, German travel firm TUI and Japanese commercial lender Sony Bank.

Number of SLB issuers by year

SLB issuance has also become more concentrated in Europe in 2024. Around $8 in every $10 raised through SLBs in 2024 has been from European issuers, up from around $5 to $6 in 2022 and 2023. In contrast, North American and Latin American and Caribbean SLB issuance has seen its issuance volume share more than halve in 2024.

The poor start to 2024 is unwelcome for the instrument after Moody's said 2024 was a "pivotal" year for SLBs amid the ongoing "quality gap" between the performance-based instruments and its use-of-proceeds equivalents, including green and social bonds. With concerns around the ambition of the targets and materiality of the structure, SLBs have struggled to see sentiment rebound.

Reflecting the growing wariness of SLBs from issuers, some potentially key issuers – including TotalEnergies – have announced they have shelved plans to issue the instrument following weak market development.

Nonetheless, there remains some optimism within the market about the longer term prospects for the instrument. Major market participants including Barclays and Amundi have argued that SLBs can have a larger role to play in the sustainable bond market, for example. What is more, the recent target miss by major SLB issuer Enel has been hailed as a potential turning point for the instrument by demonstrating the utility of the structure for supporting issuers and investors in their sustainability transition.