Global Sustainable Bond Report
S&P releases the global sustainable bond report, which provides an outlook for Green, Social, Sustainability, and Sustainability-linked Bonds (GSSSB).
Despite uncertainty about global economic growth, S&P believes global GSSSB bond issuance will grow from US$0.98 trillion in 2023 to US$0.95 trillion – US$1.05 trillion in 2024.
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Global Sustainable Bond Issuance
S&P believes that global GSSSB bond issuance will account for 14% of total bond issuance in 2024, more than half of which are green bonds. The application of sustainable taxonomies, the emphasis on sustainable financial instruments in emerging market economies and the acceleration of the energy transition will promote the issuance of sustainable bonds, while the global high interest rate environment and economic slowdown may have a negative impact.
GSSSB bonds include green bonds, social bonds, sustainable development bonds, transition bonds, sustainability-linked bonds, etc., among which green bonds account for the highest proportion. Global green bond issuance reaches US$575 billion in 2023, a year-on-year increase of 10%. Issuance volumes of social bonds and sustainability bonds were essentially unchanged. Issuance of sustainability-linked bonds fell 14% to $66 billion in 2023 due to difficulties in measuring performance using Key Performance Indicators.
At the national level, GSSSB bond issuance is dominated by high-income countries, but growth is fastest in emerging market economies. The issuance volume in the Asia-Pacific region accounts for 25% of the total global GSSSB bond issuance, which is the highest proportion in history. The market share of North America and Europe shrank, but still reached 57%. Despite regions, 78% of global issuance is still concentrated in high-income countries.
In terms of issuers, international institutions (29%), non-financial companies (28%) and financial companies (22%) account for higher proportion. The issuance scale of sovereign countries will grow the fastest, from 7% in 2020 to 17% in 2023.
In terms of currency, 70% of GSSSB bonds in 2023 were issued in USD and EUR, but the number of currencies in the GSSSB market has increased by 25% since 2021. The diversification of currency units illustrates that more and more emerging market economies are participating in the global sustainable bond market, and investors in these economies are also increasing.
Diversification of Global Sustainable Bond
S&P believes that as the GSSSB market continues to develop, issuers and investors may issue bonds that differ from traditional GSSSB categories, such as climate transition bonds and blue bonds. Climate transition bonds were first issued in 2019, and their current market share is less than 1% of the total size of global GSSSB bonds. The bonds will help issuers achieve climate goals and provide access to the sustainable bond market. Global jurisdictions are also paying attention to this type of bond market. The Monetary Authority of Singapore (MAS) has issued the world’s first transitional taxonomy to provide a classification basis for economic activities for climate transition bonds.
Blue bonds may also become a hot spot in the GSSSB market this year. Blue bonds mainly provide financing for the sustainable use of marine resources. As of December 2023, US$6.8 billion has been issued globally, accounting for 0.2% of the total global GSSSB bonds. The Global Organization for Economic Cooperation and Development (OECD) believes that the global scale of ocean economy will reach US$3 trillion in 2030. An analysis of Nationally Determined Contributions (NDCs) by the United Nations Environment Program (UNEP) shows that more than 95 countries around the world have formulated goals and policies to protect marine ecosystems. Therefore, the issuance scale of blue bonds will continue to increase in the future.
Reference:
Sustainability Insights Research: Sustainable Bond Issuance to Approach $1 Trillion In 2024
