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Market size

S&P Global (Mar-23) estimates modest growth of +2.5% in the green, social, sustainable, and sustainability-linked bond (GSSSB) market for 2023, reaching US$900bn-US$1 trillion, nearing the record US$1.06 trillion in 2021. This follows a 2022 in which contractionary monetary policy and macroeconomic uncertainty pulled down global bond issuance by -22%. However, in June 2023, Bloomberg reported that new sales of green bonds totalled US$62.3bn in May 2023, making it the most active May since the inception of the green debt market in 2007.

The composition of the green, social, sustainable, and sustainability-linked bond (GSSSB) market in 2022 was as follows: green bonds continued to account for over half of issuance (55%); while social (19%), sustainability (17%) and sustainability-linked bonds (SLBs) (8%) each comprised a marginally smaller proportion of the market compared to 2021.

Trends & Outlook

S&P (Mar-23) anticipates that in 2023, green bonds will continue to drive the GSSSB market. Issuers across sectors are likely to look to finance projects that allow them to align themselves with nationally determined contributions and individual net-zero commitments. As for social bonds, issuance growth will be the slowest among the GSSSB types in 2023.

S&P adds financial services issuers were the only issuer type to have increased bond issuance volumes year-on-year in 2022. Their total issuance value reached nearly US$215bn in 2022, a +14% increase. Use-of-proceeds bonds will continue to be the most prevalent form of GSSSB from financial services issuers. This is because increasingly demanding regulatory environments should allow banks to quickly identify sustainable assets in their portfolios that can be financed using such bonds.

Europe is expected to retain its leading share of issuance in 2023. Green bonds in the use-of-proceeds category will continue to lead issuance in EMEA in 2023, driven by the focus on credible net-zero plans by issuers, the European Central Bank’s intent to green its bond-buying programme, and the implementation of the EU Taxonomy and EU green bond standards.

GSSSB in Asia-Pacific is anticipated to grow +20% in 2023, outpacing other regions. China, South Korea, and Japan will remain the dominant GSSSB issuers in APAC due to the size of their economies and established issuer and investor bases. These countries have accounted for 70%-80% of the region’s issuance for the past five years.

A return to GSSSB issuance growth is expected in North America, as economies in the region begin to recover in the second half of 2023. Non-financial corporate issuance in particular may rebound, and issuance volumes will likely increase to new highs as entities look to take advantage of tax credits offered by the Inflation Reduction Act. US municipal issuers have demonstrated resilience in the face of wider bond market headwinds, and S&P expects this trend to continue in 2023. There is sizeable demand for GSSSB bonds in municipal markets.

In Latin America, at least one-third of all bonds issued in the region are likely to be labelled as GSSSB.

According to MSCI (Apr-23), with the expansion of the global green-bond market, there has been a notable rise in the share of green bonds issued by governments.  Bonds issued directly by government departments have risen from approximately 7% of the US$167bn total market value on 31 December 2017, to over 20% of the US$986bn market on 31 March 2023.


The FT (Feb-23) reported the market for sustainability linked bonds (SLBs) is flagging, as investors worry that the debt does not impose sufficiently stringent penalties on companies for missing their climate targets. The FT says that, in practice, the “step-up” in coupon payments embedded in the bonds’ terms have been too small to provide much incentive to issuers to clean up their act. Meanwhile, some environmentally conscious investors simply do not want to hold debt issued by companies at risk of reneging on their green promises. A recent Morgan Stanley report recommended issuers start setting goals that are trickier to meet, “otherwise the bond’s impact is de minimis.”

The Harvard Business School (Aug-22) says that, while sustainable debt investing has clear social and environmental benefits, its growth has led to the rise of a phenomenon known as “impact washing.” Impact washing is the practice of embellishing or overstating a particular investment’s positive impact. Without laws and proper regulation for sustainable investments, some bond issuers or fund managers exploit this trend by declaring assets, stocks, or bonds as green without backing up claims or guaranteeing results.

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