Global issuance of green, social, sustainability (GSS) and sustainability-linked bonds (SLBs) will hit a record $1.35trn (€1.2trn) in 2022, a 36% increase over the estimated $992bn issued in 2021, according to research from Moody’s ESG Solutions.
However, despite the growth, the rise is less than last year’s 64% jump.
Breaking it down, the bulk or $775 billion of this year’s tally is expected to emanate primarily from green bonds followed by $225 billion in sustainability bonds, $200 billion of SLBs and $150 billion of social bonds.
GSS are types of labelled use-of-proceeds bonds, while SLBs are have coupons linked to sustainability performance targets and, raise money for general corporate purposes rather than for defined projects or categories of activity.
The Moody’s business unit attributed the slowing rates to a maturing market as well as potential headwinds from monetary policy tightening.
It said that the risk of global fragmentation in sustainable investment policies and practices and taxonomies, as well as growing scrutiny over the credentials of some sustainable debt instruments, could also weigh on “the continuation of unfettered market growth”.
“Still, GSS bonds will continue to rise as a share of global bond issuance, potentially reaching 15% of the total in 2022,” said Matthew Kutchtyak, vice-president, and Erika Bruce, associate analyst at Moody’s ESG Solutions.
Kutchtyak and Bruce also forecast social bond issuance to decline by about 25% compared with 2021 as financings linked to the coronavirus pandemic largely retreat.
However, they added that social issues will remain “top of mind” for many investors and market participants.
SLBs came into their own last year with issuance surging to $90bn from $9bn in 2020. This could involve issuers besides European corporates, which have dominated the market so far.
Investor scrutiny of SLB targets and net-zero commitments would grow, they said, as issuers were increasingly embedding decarbonisation targets in their SLBs, and relatively few companies were actually demonstrating net zero-aligned targets today.
In addition, Moody’s ESG Solutions also considers that emerging market sustainable bond markets will see significant growth in 2022 given heightened ESG risk exposures and significant sustainable development needs in many emerging market countries.
Last year, GSS and SLB issuance in emerging markets totalled $136bn, more than double the previous record of $51bn registered in 2020.
©Markets Media Europe 2022
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