2023 Sees Record $351bn Global Green Bond Surge
In the first half of 2023, global green bond issuances achieved an all-time high in attracting investments from various investors.
According to an analysis conducted by the esteemed global law firm Linklaters, a total of 1758 sustainable bond products were issued during this period, amassing an impressive $568 billion. Most sustainable bond categories, except for Sustainability-Link Bonds (SLBs), experienced a notable increase compared to the same period in 2022.
Notably, green bonds stood out as the dominant force in the sustainable bond market, with 935 green bonds issued during H1 2023, raising an astonishing $351 billion. This marked a historic six months in terms of the capital raised from investors and set the trajectory for 2023 to become a record year for green bond issuances.
Of the total capital raised in H1, green bond issuance by banks played a significant role, amassing $123 billion. The surge in bank-backed green bonds was unprecedented and reflects the global banking sector's growing involvement in financing environmentally friendly projects.
While the Asia Pacific region experienced substantial growth in sustainable bonds, Europe maintained its position as the largest green bond market, boasting 448 green bonds issued in 2023's first half with a cumulative value of $190 billion.
The flourishing market growth occurs amidst a continuously evolving regulatory landscape in Europe, where the adoption of the EU Green Bond Standard is expected in the autumn. With the momentum of green finance showing no signs of slowing down, issuers seek expert legal advice to navigate the rapidly changing regulatory environment and ensure compliance with applicable standards.
In contrast, Sustainability-Link Bonds (SLBs), which had witnessed rapid year-on-year growth since H1 2021, experienced reduced issuance in H1 2023. SLBs distinguish themselves by linking ESG performance to financial performance through Key Performance Indicators (KPIs) and associated targets.
The decline in SLB issuance was attributed to investors' increased scrutiny regarding the selection of KPIs, the ambitiousness of targets, and the robustness of product terms. The careful structuring of SLBs to avoid greenwashing concerns remains a key focus.
Ben Dulieu, Capital Markets Partner, emphasised that as the urgency of climate transition intensifies, regulators worldwide place greenwashing at the forefront of their agendas. Recent developments, like the political agreement on the EU's Green Bond Standard, aim to enhance market transparency and instill confidence in sustainable finance products.
Source: Climate Action