Global green bond market set to break records, surpassing $500bn in 2021
Global green bond issuance is likely to pass the half-a-trillion-dollar mark this year, the Climate Bonds Initiative is forecasting, following a strong first half of the year for the market.
The prediction forms part of the Initiative’s new summary report for happenings in the global sustainable debt market during the first half of 2021.
Published on Tuesday (31 August), the report predicts that global issuance is likely to surpass $500bn this year and that the possibility of issuance surpassing $1trn in 2023 is strong. The 2021 forecast is now $50bn-$100bn higher than the Initiative first expected in January.
Predictions are predicated on the fact that issuance exceeded $227.8bn in the first half of 2021. In comparison, issuance during the whole of 2020 totalled $297bn. Figures cover green, social and sustainability (GSS) bonds from nations, businesses and other actors.
The Initiative has recorded a 59% year-on-year increase in the value of GSS bonds issued during H1 of 2021.
Bonds issued under the social theme saw a sharper increase than green or sustainability-related bonds. Issuance quadrupled year-on-year, surpassing $146.6bn in H1 of 2021, compared with $36.8bn during H1 of 2020. The Initiative emphasised the fact that green and sustainability-related bond issuance has been increasing steadily for several years, while social bond issuance has boomed in 2020 and 2021 as nations and businesses seek to respond to the Covid-19 pandemic.
The Initiative also looked at which nations are leading the way in GSS bond issuance. The US remained the largest market, taking 17% of the global share, with $37.6bn of bonds issued in H1 of 2021. Germany placed second with 13% of global issuance volume, $28.5bn. This was, in no small part, due to the German Government’s issuance of a $7.3bn sovereign green gilt – the third-largest individual deal during the six-month period. The largest deal was the French Government’s $12.9bn green gilt package, while second place went to the US’s Federal National Mortgage Association.
Issuance from national governments is likely to continue to grow in the next two years, the Initiative is predicting, as nations seek to bolster long-term net-zero targets with more clarity on decarbonising high-emitting sectors.
“We expect a stream of COP26-timed commitments from the financial sector, more sovereign green issuance and an acceleration of policy measures, including the EU bond program, will all drive market growth towards a record 2021 and strong start in the first half of 2022,” the Climate Bonds Initiative’s head of research and reporting Krista Tukiainen said.
The UK Government is planning to announce more information about its own £15bn ($20.8bn) green gilt package later this year. The package was first confirmed in November 2020 and the amount confirmed earlier this summer. Chancellor Rishi Sunak has stated that the UK’s first green gilts will not be its last.