Global sustainable bond issuance to hold up, Moody’s says

Despite a slowdown in the third quarter, global sustainable bond issuance is still on track to hit US$950 billion for the year, Moody’s Investors Service says.

In a new report, the rating agency said total issuance of green, social, sustainability and sustainability-linked bonds came in at US$198 billion last quarter.

Green bonds led the way with US$100 billion of new offerings, followed by social bonds at US$42 billion, US$37 billion of sustainability bonds, and US$19 billion in sustainability-linked bonds.

While volumes slowed in the third quarter, Moody’s said it’s still forecasting total issuance of US$950 billion for the full year “following a relatively strong first half of the year.”

The upcoming COP28 conference in Dubai will also support issuance, it said, as the conference will review global progress under the Paris Agreement, while also prioritizing “the global energy transition, catalyzing climate finance and transforming food systems.”

“Progress in these areas would support global sustainable debt market activity, particularly with respect to sovereign issuance, transition finance, emerging market activity and adaptation-focused projects,” Moody’s said.

Over time, a growing focus on nature and biodiversity risks, and developments such as the recent release of the final reporting recommendations from the Taskforce on Nature-related Financial Disclosures will also support diversification of sustainable bond issuance, it said.

“Although a small part of the market today, we expect sustainable bond projects related to these areas will gradually increase,” it said.

Ongoing concerns about greenwashing risks are a potential threat to the continued growth of the sustainable bond market, Moody’s noted.

“These risks may materialize because greenwashing can have significant unintended consequences for investors, issuers, regulators and other market actors,” it said.