Global Issuance of Green Bonds Hits 4-Month High Despite Volatility

Global sales of green bonds increased for the second month in a row in September to the highest level since May despite increased volatility in the broader market, reported Bloomberg.

According to the data, organizations and governments around the globe picked up more than $54 billion in green bonds last month, compared to more than $35 billion raised in August despite overall bond issuance tumbling in the United States and Europe as central banks around the world increased their efforts to combat inflation.

Green bonds are the largest category of sustainable debt by amount issued and designed to raise funds to invest in environmental or climate change mitigation projects.

Last month, risk assets plunged into a death spiral over concerns that the US Federal Reserve’s monetary tightening could ram the economy into a slump, making it extremely difficult to sell new bonds. According to Bloomberg data, the number of deferred transactions increased to at least ten last month, the most since June and up from one in August. Sales in the US investment-grade market fell 47 percent short of expectations, and top bond underwriters anticipate $75 billion in new bond sales in October.

Green bonds may resonate with investors who want to purchase such debt because the issuer is familiar to them. A senior Bank of America official told Bloomberg that bond deals that appeal to the broadest segment of the investor base tend to be the most successful during volatile markets. “It’s not surprising that more green bonds were launched given the incremental investors those deals tend to attract,” he said.

Europe is leading the charts as a dominant market for sustainable financing. Among the notable issuers that brought deals worth more than $1 billion in September were Italy, Citigroup Inc., and the European Investment Bank.

Meanwhile, global sales of social, sustainability and sustainability-linked debt including bonds and loans slumped last month. ESG debt sales for municipals fell as well, while green-loan issuance increased slightly.

ISSUANCE Aug ($B) Sept* ($B) YTD ($B)* YTD y-o-y (%) More detail
Green Bonds 35.48 54.05 395.78 -11.0% SRCH @GREEN
Green Bond Principles 34.73 51.96 365.12 -6.6% SRCH @GREENICMA
ESG Muni 6.98 4.68 36.98 19.3% SRCH @ESGALL – filtered for Munis
Sustainability Bonds 16.49 15.74 139.37 -18.1% SRCH @SUSTAINABILITY
Social Bonds 9.61 9.49 106.917 -48.8% SRCH @SOCIALBOND
Sustainability-linked Bonds 5.97 4.45 108.36 -2.4% SRCH @LINKEDBOND
Sustainability-linked Loans 15.95 10.44 330.6 0.30% SRCH @LINKEDLOAN
Green Loans 1.67 1.83 50.43 -18.1% SRCH @GREENLOAN

According to the World Bank, green bonds have become an important tool to address the impacts of climate change and related challenges over the last 14 years. Clean water and food security are at risk in the world today and about 1 million of the world’s 8 million animal and plant species face extinction.

The crises lender says is critical to link environmental projects with capital markets and investors in order to channel capital towards sustainable development – and green bonds are one way to do so.