Sustainable bond growth in 2022 under review

Standard & Poor’s cuts its forecasts for the total value of sustainable bonds issued by 16 percent throughout 2022

Despite adding new and powerful allies during this year, such as Singapore, which last August announced its intention to launch its first green bonds in history, the reality is that the market for new sustainable fixed income issues is going through very low hours.

So much so, in fact, that Standard & Poor’s opted this week to cut by 16 percent the growth forecast it had made for the global sustainable bond market in 2022, “in light of worsening credit conditions so far this year.” If the credit rating agency considered in February that 2022 would leave a total of sustainable emissions worth 1.5 trillion dollars, it now estimates that the total figures “will barely reach 865,000 million dollars”.

During July, for example, sales of green bonds fell to 24,000 million dollars, a figure that meant remaining at almost half the value generated during the same month last year, when green paper was issued for more than 45,000 million dollars.

Therefore, given these “weaker issuance trends in global bond markets in the first half of 2022”, which S&P predicted “will probably continue in the second”, the global institution began to reduce its forecasts.

The sectors most affected by this fall in sustainable bonds

Within the general decline that S&P contemplated in its new forecasts for the global sustainable bond market, the credit rating agency highlighted in its report that “global economic conditions have affected some types of issuers more than others.”

In this sense, non-financial companies maintained their leadership share during the first half of the year at 39 percent, “but with a 16 percent decrease in issuance.”

The financial services sector, which includes banks and insurers, on the other hand, is “the only type of issuer that has increased issuance,” increasing its share to 11 percent.

The worst decline was recorded by the public sector, in which a 37 percent decrease in the issuance of green fixed income instruments was drawn, “although the total issuance of debt in the sector increased by 22 percent.”

“The downward trend of the public financial sector is largely explained by the wave of social bond issuances in the first half of 2021, by the European Commission,” S&P explained in its report.

These emissions from the European Union, the agency clarified, amounted to more than 55,000 million dollars in 2021, due to the high activity of the SURE program, launched to mitigate the economic and social effects of the pandemic.

Differences by region

Interestingly, although the European Union bears some of the blame for the least amount of new green bonds in 2022, Europe remained the region with the greatest weight in the implementation of this role in the market, according to data provided by S&P.

The agency, which expected the regional distribution of sustainable emissions to remain “relatively constant until 2022,” said in its report that Europe was the point of origin of 45 percent of global emissions in the first half of 2022.

Strong 17 percent growth in the year-on-year comparison between semesters saw Asia and Oceania jointly rise to second place in the regional division established by S&P.

Exceeding $100 billion in emissions during the first six months of 2022, the region accounted for 23 percent of the global market.

North America, meanwhile, captured 16 percent of the market share, while Latin America remained at 3.5 percent.

Source: Finance