Key Impact Points:
- Despite global uncertainties, S&P Global Ratings predicts modest growth in Global Green, Social, Sustainability, and Sustainability-Linked Bond (GSSSB) issuance to reach $0.95 trillion-$1.05 trillion in 2024.
- Green bonds are expected to maintain dominance, driven by increased demand for environmental projects globally.
- Emerging markets, particularly middle- and low-income countries, are anticipated to increase their share of GSSSB issuance to meet funding needs.
- Transition and blue bonds are poised to gain traction, showcasing the market’s evolution beyond traditional categories.
S&P Global Ratings recently released its global bond forecast for 2024, shedding light on the trajectory of sustainable bond issuance. Despite macroeconomic uncertainties, the forecast suggests a cautiously optimistic outlook for the sustainable finance market.
According to the report, GSSSB issuance is expected to experience modest growth, reaching between $0.95 trillion and $1.05 trillion in 2024, up from $0.98 trillion in 2023. This growth, although moderate, signifies a continued commitment to sustainable financing amid global challenges.
Green Bonds Lead the Way
Green bonds are anticipated to maintain their lead in the GSSSB market, driven by heightened demand for environmental projects worldwide. With a 10% year-on-year expansion in 2023, reaching $575 billion, green bonds continue to attract issuers, particularly from Europe.
Emerging Markets Embrace Sustainable Financing
A notable trend is the increasing participation of emerging markets in GSSSB issuance. Countries in the Middle East and Latin America exhibited the fastest growth rates in 2023, signaling a shift towards sustainable finance in regions traditionally dominated by high-income countries.
Diversification and Innovation in GSSSB Market
The forecast also highlights the emergence of new bond labels, such as transition and blue bonds, indicating the market’s evolution beyond traditional categories. Transition bonds, designed to support climate transition goals, are expected to have their strongest year yet in 2024, driven by increased issuance from energy companies.
Challenges and Opportunities Ahead
While the forecast paints a positive picture, challenges remain. Questions persist about the efficacy and ambition of sustainability-linked bonds, prompting market participants to seek clarity and alignment on sustainability objectives. Additionally, macroeconomic factors such as interest rate uncertainty could impact issuance volumes, particularly in regions like Europe and Asia-Pacific.
Looking Ahead
Despite these challenges, 2024 is expected to be a year of broadening regional reach and instrument types in the GSSSB market. With increased participation from issuers across diverse sectors and income levels, the sustainable finance landscape is poised for further evolution and innovation.
As the world continues to grapple with pressing environmental and social challenges, sustainable bonds play a crucial role in channeling capital towards impactful projects. With continued momentum and innovation, the GSSSB market is well-positioned to drive sustainable development and address global sustainability goals.
Article based on S&P Global’s Sustainable Bond Issuance Forecast for 2024, published on Feb. 13, 2024.
