| In the latest quarter, sustainable bond issuance reached $234 billion, representing a 20% decline year-over-year and a 19% decrease from the robust Q1 2024 performance. For the first half of 2024, total issuance amounted to $534 billion, down 8% from the same period in 2023, yet still significantly higher than in the second half of 2023.
Green bonds remained the dominant category, totaling $146 billion in the quarter. Despite this, green bond issuance declined by 12% year-over-year in the first half of 2024, largely due to a sharp drop in the Asia-Pacific region. However, there were notable gains in Europe and North America, with first-half issuance increasing by 3% and 9%, respectively. Issuance by non-financial companies surged by 19% compared to H1 2023, while financial institutions saw a steep decline, particularly in the Asia-Pacific, where volumes fell over 80% to just $6 billion. Social bonds fell by 10% to $91 billion year-to-date, while sustainable bonds rose by 8% to $100 billion, as reported. Sustainability-linked bonds (SLBs) continued to decline, with issuance dropping to $8 billion in the quarter, the lowest since 2020. Moody’s attributed this decline to increasing investor scrutiny over the credibility and robustness of SLB-linked sustainability targets, which has dampened issuer interest following strong growth in 2021 and early 2022. The report highlighted an emerging positive trend in the transition bond market, which saw issuance exceed $14 billion in the first half of the year. Although volumes remain concentrated, with the Government of Japan accounting for nearly 90% of issuance, Moody’s anticipates broader participation as interest in transition finance grows. A key challenge noted in the report is the reduction in the number of first-time issuers. Moody’s acknowledged that a decline in new issuers is typical in a maturing market, but it also cited increasing market and regulatory scrutiny, along with concerns over greenwashing, as contributing factors. The report also pointed to new and updated guidance from the International Capital Markets Association (ICMA) as a potential catalyst for market clarity. The ICMA’s recent publications cover criteria for green-enabling projects in use-of-proceeds bonds, guidelines for Sustainability-Linked Loans, and updated principles for sustainability-linked bonds, aiming to provide clearer direction for issuers and investors. Find out more here. |
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