Sustainable Finance Markets Cool After Record-Setting Year

by | Jul 8, 2022

Sustainable Debt

(Credit: Pixabay)

After a record-setting 2021, sustainable finance bonds were down in the first half of this year, the first year-over-year decline since records began, according to a report by Refinitiv.

Overall, most sustainable financial markets – including sustainable lending, equity capital markets, and mergers and acquisitions — have seen declines since the start of 2022. However, green bond issuance at $232.7 billion and a 4% drop compared with 2021 surpassed $100 billion for the sixth consecutive quarter, according to Refinitiv.

Sustainable bonds registered $422.1 billion during the first half of the year, a decrease of 23% compared with the first half of 2021. Corporations accounted for 63% of the sustainable bond issuance over the first half of 2022, up from 53% a year ago, and European issuers held the largest market share at 52%.

Bank of America Securities led the sustainable finance bond underwriting, with a 5.4% market share, according to the report. HSBC and JP Morgan rounded out the top three in the market.

Last year, sustainable debt surpassed $1.6 trillion, the most on record and the first time it topped $1 trillion, according to BloombergNEF. Green bonds made up 45% of the sustainable debt issued in 2021.

That activity is still taking place as Equinix issued a $1.2 billion green bond earlier this year to expand data center sustainability. Amgen also issued its first green bond, worth $750 million.

Sustainable lending totaled $325.3 billion so far in 2022, according to the Refinitiv report, an 11% decrease from last year and a two-year low. American borrowers accounted for 48% of the market.

Equity capital market activity for sustainable companies amounted to $14.1 billion so far in 2022, a 42% decrease and also a two-year low. Asia dominated this area of sustainable finance holding 89% of equity capital markets.

Mergers and acquisitions also saw a two-year low over the first half of the year, reaching $90.6 billion and a 3% drop from 2021. Special purpose acquisition companies made two sustainable deals, accounting for 2% of the value of total agreements. JP Morgan advised on 11 deals totaling $36.3 billion.

With the lower numbers coming in for sustainable debt, Moody’s has forecast the market to be roughly flat in 2022, coming in at a little more than $1 trillion. Still, the expectation for the market to still see future growth remains, and the financial tools remain key parts of sustainable targets, including growth in areas like emerging markets, where they were up 13% from the first quarter of 2021.

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