Green and Sustainability Bonds Continue Surge, to Top $1 Trillion in 2021

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by | Oct 27, 2021

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Green, social, sustainability and sustainability-linked bonds (GSSS) will reach a combined $1 trillion in 2021 as the amount of the bonds issued so far this year has nearly doubled compared to 2020, according to a report from Moody’s ESG Solutions.

There have been $775 billion of the bonds issued over the first three quarters of 2021, and Moody’s ESG Solutions expects green bonds will exceed $500 billion this year, sustainability and social bonds will hit $200 billion each and sustainability-linked bonds will reach $100 billion.

At this point in 2020 there had been $402 billion of the bonds issued. GSSS bonds issued in 2020 topped out at about $600 billion.

Overall, there were $217 billion of GSSS issued in the third quarter of 2021. That is up 25% from the third quarter last year but fell from the $273 billion that were issued during the second quarter of 2021, according to the report.

Green bonds led the way with $115 billion issued. There were $52 billion of sustainability bonds and another $21 billion of sustainability-linked bonds. Third quarter social bonds were at $29 billion.

The numbers show companies have been active in 2021 with green and sustainability bonds.

Walmart priced the company’s first green bond, which was $2 billion and said to be the largest to date by a US corporation. General Mills recently announced a sustainability-linked bond of $500 million.

JPMorgan Chase & Co. also announced it issued its second green bond issuance at $1.25 billion, but as growth in the market soars to record levels there are concerns that standardization of issuance could hinder their growth. Although there are growing efforts to tackle those problems.

Moody’s ESG Solutions expects GSSS bonds to continue to rise as businesses and investors continue to focus on environmental, social and governance issues. With next week’s COP26 meeting in Europe, Moody’s ESG Solutions says more focus and international cooperation of carbon pricing, climate financing and investment for climate resilience will put even greater emphasis on tools like green and sustainability bonds.

Increasing investment in renewable energy and ramping up sustainable infrastructure could also drive the market, according to the report. Renewable energy is currently the largest use of green bonds, with 31% going toward those improvements. Green buildings, energy efficiency and clean transportation are the next highest uses.

Moody’s ESG Solutions says just 3% of the bonds have gone toward adaptation projects and the lack of investment has hindered the progress in that area.

Green and sustainability bonds have been higher every quarter in 2021 than at any other time. Green bonds hadn’t surpassed $100 billion until this year and have done so each quarter in 2021. There were more than $270 billion of GSSS bonds issued during the first quarter this year.

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