Green, social and sustainability bond issuance is set to climb 24% to US$400 billion this year, predicts Moody’s Investors Service. In a report released last week the agency noted that the market segment was rapidly maturing, and is expected to continue posting healthy growth.
“Across the financial sector, market participants are increasingly integrating ESG considerations and sustainability,” says Analyst Matthew Kuchtyak. “Governments and regulators are also providing greater structure and clarity to the sustainable finance market as their focus on climate change and sustainability grows.”
Green bond issuance will reach US$300 billion this year, while social and sustainability bond issuance will reach US$25 billion and US$75 billion, respectively. As the social and sustainability bond markets grow and mature, Moody’s also expects issuance from these segments to become more diversified in terms of sector and region, similar to trends seen in the green bond market.
Currently, most labelled green bonds, social bonds and sustainability bonds fall into the “use-of-proceeds” category – instruments whose proceeds are typically earmarked to finance eligible environmental and social projects.
“Growth in sustainable finance beyond these segments will be driven by more innovative labels and structures, and by governments and the financial sector increasing their focus on climate action,” predicts Kuchtyak. “Growth in issuance from alternative sustainability-themed labels, such as transition bonds, will accelerate given the market attention in this area. Growth may be uneven over the near term, however, due to the current lack of definitional clarity.”