Global green bond issuance reaches record levels

That is according to a new analysis released this week by Linklaters’ Debt Capital Markets team.

Drawing on data from Bloomberg, the analysis confirms that green bond issuance exceeded $350bn between January and June.

Banks were the biggest issuers of green bonds, raising a total of $123bn during the six-month period. In previous years, issuances from nations and states have been larger than those from banks. Linklaters’ conclusion is that there an increasing number of low-carbon projects that banks see as investable through bond structures.

Europe remained the world’s largest green bond market. 448 bonds have been issued since January, raising a total of $190bn. But Linklaters also found that the Asia-Pacific region is now home to the world’s fastest-growing green bond market.

Linklaters predicts that green bond issuance is likely to continue breaking records until the end of the year; 2023 could well be a record year for issuance.

Nonetheless, the analysis did reveal a dip in the issuance of sustainability-linked bonds (SLBs), following rapid growth since early 2021. These bonds invest in a wider range of projects than green bonds. In addition to, or instead of, climate, they may invest in public health or social equality, for example. They have proven to be popular vehicles for contributing to Covid-19 recovery efforts.

Linklaters attributes the fall to increased regulatory scrutiny around SLBs, plus additional public criticism of selected schemes, in an attempt to weed out greenwashing. This trend has been particularly visible in the EU.

Ben Dulieu, partner in LinkLaters’ capital markets team, said: “As the urgency of the climate transition intensifies, so too will scrutiny of sustainable finance products. Greenwashing is at the top of the agenda for regulators across the world and recent developments such as the political agreement on the EU’s Green Bond Standard will aim to bring increased transparency and confidence to the market.”

Masdar

Earlier this week, the United Arab Emirates (UAE) state-owned energy major Masdar launched its first green bond. The $750m bond was more than five times oversubscribed.

Finance raised through the bond will be used exclusively for what Masdar describes as ‘dark green’ projects – predominantly renewable energy in developing nations.

Masdar has set a target to raise up to $3bn in green bonds in total as it seeks to own and operate a 100GW renewable energy portfolio.

While this is a welcome target, Masdar’s parent company, oil and gas giant ADNOC, is one of the world’s biggest 25 historic polluters. ADNOC is, at present, being scrutinised over the extent to which it could influence decisions made at COP28 in Abu Dhabi this winter.

The COP28 presidency has agreed to push for a final agreement to ‘phase down fossil fuels’, calling this “necessary” and “inevitable”. Last year, the UAE delegation tried to argue that fossil fuel producers could use carbon capture in lieu of cleaner energy, phasing down emissions but not fossil fuel use. The UN slammed this as unscientific.