Sustainable bond issuance to total $850bn in 2021, Moody's says

More than $3tn in fiscal stimulus globally will be dedicated to financing a green recovery by 2025

Wind turbines near a sorghum farm in La Ventosa, Oaxaca state, Mexico. Green bond issuance is expected to be about $450bn this year, according to Moody's. Alejandro Cegarra / Bloomberg
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The global issuance of sustainable bonds, including green bonds, is expected to reach $850 billion in 2021, an increase of 59 per cent from last year, because of strong investor demand, according to the latest report from Moody’s Investors Service.

Green bond issuance alone is expected to be about $450bn this year, while social bonds and sustainability bonds will total about $200bn each, Moody’s said.

"We … expect sustainable bonds to account for around 8 per cent to 10 per cent of global debt issuance in 2021, as issuers across all segments of the market continue to explore how they can link their capital markets activities with their sustainability objectives,” Matthew Kuchtyak, assistant vice president-analyst at Moody’s, said.

The total volumes across three segments more than doubled to $427bn in the first half of the year, according to the ratings agency. Green bond issuance during the period stood at $199bn, while social bonds totalled $136bn, and sustainability bonds touched $92bn.

Green bonds are financial instruments structured to fund schemes relating to climate change and the environment. Globally, the green bonds market is estimated to reach $2.36 trillion by 2023, according to the World Economic Forum.

Their volumes in the second quarter reached $94bn, 10 per cent lower than the record $105bn issued in the first quarter of the year, but 48 per cent higher than the first quarter of 2020.

“Given the record issuance levels observed in the first half of the year and our expectations that issuer interest in financing climate mitigation and adaptation projects with green bonds will only increase, we now believe issuance for the full year will top $450bn,” Moody’s said.

Non-financial companies and financial institutions are leading green bond volumes with $64bn and $42bn of issuance, accounting for 32 per cent and 21 per cent of the total issuances globally.

There were 12 green bond tranches of at least $1bn in the second quarter, led by a $7.3bn deal from the government of Germany in May and a $4.8bn transaction from Germany’s investment bank Kreditanstalt fuer Wiederaufbau in April, according to Moody’s.

Financial institutions in the Middle East and North Africa are also looking to raise funds through green instruments, with First Abu Dhabi Bank, the largest lender in the UAE, issuing green bonds in Swiss francs and Chinese yuan.

More than $3tn in fiscal stimulus globally will be dedicated to financing a green recovery, while environment social and governance (ESG) assets may top $53tn by 2025, representing more than a third of projected total assets under management, according to Bloomberg Intelligence’s Global ESG 2021 Outlook.

Updated: July 30, 2021, 5:00 AM