Bond investors and issuers brace for record year in sustainable debt

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As one of the hottest and most sought-after parts of the fixed income landscape, the sustainability-linked and green bond markets are flourishing amid ambitious climate commitments globally.

April 19, 2022

Global sustainable bond issuance is surging, with market commentators expecting 2022 to be a record year despite global issuance of traditional bonds stagnating.

According to S&P Global Ratings, issuance of sustainable bonds - including green, social, sustainability (GSS) and sustainability-linked bonds - will surpass $1.5 trillion this year. Moody’s, meanwhile, is forecasting $1.35 trillion in 2022, following a record 2021 when sustainable bond issuance grew 64% year-on-year to nearly $1 trillion.

Several factors are fueling this, including investor demand, regulatory developments to help standardise the market and the desire among issuers to diversify their investor base and potentially obtain favourable pricing terms.

Within the sustainable universe, sustainability-linked bonds will be the fastest-growing segment of the market, followed by green bonds, believes S&P Global Ratings - which also foresees sustainable bonds accounting for around 17% of total 2022 global bond issuance, up from less than 5% three years ago. At the same time, social and sustainability bonds will continue to grow as they diversify into new projects in support of the 2030 Sustainable Development Goals (SDG) agenda.

These trends are the basis for the 5th annual sustainable finance poll by FinanceAsia and ANZ. See more details here.

Based on the respondents so far, some of the interim results include:

• Over 90% of investors and issuers say GSS issues are being considered within their organisations and integrated into their strategy

• Nearly half (44%) of investors and issuers say Covid-19 has led them to have a greater focus on sustainable finance and GSS instruments; a similar amount says the pandemic hasn't changed their existing focus

• Of the 80% of investors already investing in GSS bonds and loans, renewable energy is the most popular sector, followed by health and aged care

• Investor diversification and alignment to sustainability objectives are the two main drivers for issuers when it comes to GSS instruments

Investors and issuers across Asia Pacific are invited to participate in this 5th annual FinanceAsia / ANZ sustainable finance poll.

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