Despite macroeconomic headwinds, GSS+ issuance maintains pace with overall bond market, reports Climate Bonds Initiative.
Total issuance of green bonds crashed through the US$2 trillion barrier at the end of September, despite slowing growth in a fixed-income market overshadowed by recession fears, rising interest rates and international tensions.
The cumulative figure was described as “a huge milestone” in the latest quarterly update from Climate Bonds Initiative (CBI), which administers the Climate Bonds Standard and Certification Scheme.
Green bonds make up the largest single component of CBI’s catalogue of responsible fixed-income investments, at US$2.008 trillion, against an overall figure of US$3.510 trillion.
The other categories comprise social bonds, with a cumulative issuance of US$617 billion, sustainability bonds at US$678.9 billion, sustainability linked bonds at US$192.9 billion and transition bonds, at $12.7 billion.
Across the board drop
The report noted: “The geopolitical tensions and rising inflation that have emerged this year have stunted the global bond market and contributed to a drop in issuance across the board.
“In 2021, a record year for GSS+ issuance, labelled debt constituted 5% of all debt issued. Though 2022 has seen a decrease in global bond volumes, the share of GSS+ issuance has remained unchanged from the 2021 contribution.”
Year-to-date volumes of GSS+ debt reached USD635.7 billion by the end of Q3 2022. More than half of the total issues (52%) came from green bonds, with sustainability bonds supplied 22.4%, social 14.8%, SLBs 10%, and transition contributed the smallest share at 0.5%.
CBI added that, in terms of issuance: “GSS+ volumes reached US$152.3 billion in the third quarter of 2022, a decline of 35% compared to the third quarter of 2022, and 45% compared to the third quarter of 2021.
The vast majority of GSS+ paper, 80%, was issued in one of three currencies, said the report – the US dollar, the euro and the Chinese yuan. At the end of the third quarter of 2022, the three largest issuers were the World Bank (US$165 billion), the European Union (US$141 billion) and France’s social security amortisation fund CADES (US$120 billion).
Top three sovereign green-bond issuers in the quarter were Italy, at US$6.1 billion, Germany, at US$4.5 billion, and Singapore, at $US1.8 billion. The leading three non-sovereign issuers were the German state-owned investment and development bank KfW, at US$4,3 billion, the supranational European Investment Bank at US$4 billion and American giant General Motors at US$2.3 billion.
The report paid special attention to the Middle Eastern and Africa GSS+ market, which is topical given the COP27 climate summit in Egypt. It said the region faces “a unique combination of climate issues with 12 out of the 13 Organisation of the Petroleum Exporting Countries (OPEC) members based in the region”.
It added: “The Middle East must cut its economic dependency on fossil fuels, while access to energy in the rest of Africa must increase through the development of resilient infrastructure.” The market, the report said, is under development and has huge potential for growth, particularly given the vast assets under management in sovereign wealth funds (SWFs) and pension funds in the region.