October 2023 | Sustainable Finance Market Highlights

Market and Regulatory Highlights

Q3 2023 saw $176.5bn in GSS+ bond issuances, bringing the year-to-date volume to $716bn, according to Environmental Finance.

While that remains shy of the approximately $200bn issuance volume in the same quarter of 2022, the last three months of the year are expected to bridge this gap and replicate the $910bn total issuance in 2022 (Environmental Finance).

This likely stagnation of the market is influenced by the high inflation seen across the global economy for the past two years. While inflation is slowing , it remains above the target level in many countries and the global outlook continues to be weak. This indicates that it may be some time before monetary policy is eased. (Nordea)

The SLB market is expected to be on the rise again, after slowing down sharply in 2022 and H1 2023. (Environmental Finance)

Transition bonds and hard-to-abate transition segments of the market are also expected to  rise again, facilitated by the updated Climate Transition Finance Handbook of June 2023. That should help issuers especially in the ‘use of proceeds’ format, with clearer guidance on the nature of disclosures required to access the green bond market. (Environmental Finance)

In terms of regulatory updates, the summer months have seen the European Commission’s formal adoption of the ESRS under the Corporate Sustainability Reporting Directive (CSRD). The new set of disclosure standards will apply to all entities operating within the EU and subject to the CSRD. The goal of the reporting standards is to create comparable and reliable sustainability information and increase public accountability for sustainability impacts, while reducing the reporting burden for corporates over the long term. (Nordea)

In September, the International Energy Agency (IEA) updated its Net Zero Roadmap setting out a new global pathway to keep the 1.5 °C goal within reach. This update to the original report published in 2021 incorporates changes to the energy sector over the past two years, including the post-pandemic economic rebound and the extraordinary growth in some clean energy technologies – but also accounts for continued investment in fossil fuels (IEA).

The International Capital Market Association  released its New Guidance on Blue-Themed Bonds, which provides issuers with information on the key components to launch a credible “blue bond.” The voluntary Guidance builds on the existing global market standards that underpin the global sustainable bond markets, such as the ICMA Green Bond Principles. (ICMA)