Sustainable bond market contracts is down 19% from Q1
ECONOMY & POLICY

Sustainable bond market contracts is down 19% from Q1

Moody's Ratings reported a decline in global sustainable bond issuance for the second quarter of 2024. The total issuance reached $238 billion, which represents a 20% decrease from the previous year and a 19% drop from the first quarter of this year. In the first half of 2024, cumulative issuance across five labeled categories amounted to $534 billion, marking an 8% decline from the $581 billion recorded in the same period of 2023.

The breakdown of the issuance includes $146 billion in green bonds, $39 billion in social bonds, $41 billion in sustainability bonds, $8 billion in sustainability-linked bonds, and $3 billion in transition bonds. Despite this decline, Moody's projected that the sustainable bond market could still meet the forecast of $950 billion for 2024 and potentially reach $1 trillion in annual issuance.

The report also noted a significant reduction in the number of new issuers, which has decreased by over a third annually since peaking in 2021. This reduction is attributed to heightened scrutiny from market regulators and concerns about greenwashing, which could be constraining market growth.

Additionally, the market for sustainable loans experienced a 29% drop, falling to $286 billion from $402 billion in the first half of 2023. Most of this segment consists of sustainability-linked loans, which have been impacted by issues related to missed targets and greenwashing concerns.

In response to these developments, the International Capital Market Association (ICMA) has released new guidance documents aimed at supporting green enabling projects and sustainability-linked loans. These updates emphasize a greater focus on transition finance, structural innovation, and improving the sustainability quality of financial instruments.

Moody's Ratings reported a decline in global sustainable bond issuance for the second quarter of 2024. The total issuance reached $238 billion, which represents a 20% decrease from the previous year and a 19% drop from the first quarter of this year. In the first half of 2024, cumulative issuance across five labeled categories amounted to $534 billion, marking an 8% decline from the $581 billion recorded in the same period of 2023. The breakdown of the issuance includes $146 billion in green bonds, $39 billion in social bonds, $41 billion in sustainability bonds, $8 billion in sustainability-linked bonds, and $3 billion in transition bonds. Despite this decline, Moody's projected that the sustainable bond market could still meet the forecast of $950 billion for 2024 and potentially reach $1 trillion in annual issuance. The report also noted a significant reduction in the number of new issuers, which has decreased by over a third annually since peaking in 2021. This reduction is attributed to heightened scrutiny from market regulators and concerns about greenwashing, which could be constraining market growth. Additionally, the market for sustainable loans experienced a 29% drop, falling to $286 billion from $402 billion in the first half of 2023. Most of this segment consists of sustainability-linked loans, which have been impacted by issues related to missed targets and greenwashing concerns. In response to these developments, the International Capital Market Association (ICMA) has released new guidance documents aimed at supporting green enabling projects and sustainability-linked loans. These updates emphasize a greater focus on transition finance, structural innovation, and improving the sustainability quality of financial instruments.

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