January 2024 | Sustainable Finance Market Highlights

Q4 2023 saw $227bn of GSS+ bond issuances, bringing the final volume for 2023 to about $785bn, according to ICMA (Quarterly Report).

The figure means the market fell short of the total for 2022, which amounted to $925bn in issuances (Crédit Agricole CIB ESG Fixed Income Research).

Looking at 2024, a variety of forecasts have been released, and expectations in general remain positive following a 2023 marked by high inflation and general market uncertainty. Market growth is expected to be fueled by EU issuers, with the EU Commission announcing it intends to issue €75 billion worth of bonds in the first half of 2024, primarily to finance the NGEU program (Environmental Finance). The trends seen in 2023 will continue despite geopolitical challenges, and green bonds will still be the most common format, according to Crédit Agricole CIB ESG Fixed Income Research.

Barclays expects corporate sustainable bond issuance to bounce back in 2024, after falling 8% to $332 billion in 2023 from $361 billion in 2022. This reversal may be driven by a return to growth of the U.S. dollar supply following a sharp decline in 2023 (Environmental Finance).

In terms of regulatory and market updates, the main announcement surely came out of COP 28 in Dubai. The conference implemented the Loss and Damage Fund to aid poorer countries that are struggling with the effects of climate change and concluded the first global stock take of climate action under the Paris Agreement. Delegates backed a formal declaration calling for a transition away from fossil fuels and towards climate-neutral energy systems. It was the first-ever COP decision to address fossil fuels. (UNFCCC).

Transition issuances are expected to rise sharply as a result of COP 28. Most notably, the market is expected to focus on adaptation and transition, with the adoption of new technologies such as e-fuels for maritime shipping, CCU, direct air capture, and other solutions in the transportation and hard-to-abate sectors. For more on COP 28, read ISS-Corporate’s recent blog post here.

Deals by sovereign issuers are expected to increase over the next year, together with a proliferation of local national taxonomies that will increase demand for specific analyses by external providers (ISS-Corporate).

Finally, in October 2023, the EU Commission formally adopted the regulation for the establishment of the EU Green Bond Standard (EU GBS), which will enter into force by the end of 2024 (EU Council). This opens a period of intense work for the European Securities and Markets Authority and regulators, who are expected to start publishing guidelines for EU GBS and verifiers alike.