Sustainable bond issuance to hold up: Moody’s

Despite slowing economic momentum, Moody’s Investors Service is projecting that sustainable bond issuance will hold steady in 2024.

In a new report, the rating agency forecasts that issuance of sustainable debt will be flat at US$950 billion in 2024, comprising an estimated US$580 billion of green bonds, US$150 billion of social bonds, US$160 billion of sustainability bonds, and US$60 billion of sustainability-linked bonds.

“Growing policy support for green solutions including green hydrogen, biofuels, battery storage and carbon capture, utilization and storage is fuelling growth in private and public investment,” the firm noted.

This sort of policy support can help emerging technologies become increasingly competitive from a cost perspective, “increasing the likelihood that these projects will become a growing fixture of sustainable bond frameworks,” it said.

Additionally, the shift from voluntary standards to regulatory mandates will gain traction this year, Moody’s said.

“[The] application of the new European green bond standard in 2024 will be the cornerstone of the market’s embrace of regulatory standards,” the report said.

“Disclosure requirements and reporting standardization should also help support sustainable bond activity,” it added.

The sustainable bond market will also continue to diversify in the year ahead, Moody’s said.

“Projects addressing natural capital, gender equity and just transition will continue to blossom this year, which will … bolster its long-term growth prospects,” it said.

Conversely, a declining investor appetite for sustainability-linked bonds amid ongoing concerns about sustainability performance and other issues “has discouraged some would-be issuers from entering the market,” it said.

“With waning appetite for sustainability-linked bonds, we expect volumes to decline both in absolute terms and as a share of total sustainable bond issuance,” Moody’s noted.