According to S&P Global Ratings' global bond forecast for 2024, green bonds will maintain their dominant position in the sustainable finance market. They also predict an increase in the variety of bond types and participation from different regions. The forecast expects a 4.3 per cent growth in global bond issuance.
In particular, S&P Global Ratings predicts that Green, Social, Sustainability, and Sustainability-Linked (GSSSB) issuance may rise modestly in 2024. They project GSSSB issuance to represent 14 per cent of total bond issuance and to rise at a similar pace as conventional bond issuance.
In 2023, green bond issuance increased by 10 per cent to $575 billion, primarily from Europe. Nonfinancial corporates dominated the market, followed closely by the financial services sector. Sovereigns also had a strong year, with GSSSB issuance reaching $160 billion.
However, social and sustainability bonds remained flat, with declines in Europe and North America. Asia-Pacific saw growth in social bond issuance, with Japan, Korea, and Hong Kong being major contributors. International public finance issuers led the way for sustainability bonds.
Sustainability-linked bond (SLB) issuance declined for a second consecutive year in 2023, with a 14 per cent drop to $66 billion. Market participants question the sustainability performance targets (SPTs) and the standard coupon adjustments associated with SLBs.
The GSSSB issuance market saw a shift from high-income countries to other regions in 2023, with the Middle East and Latin America experiencing the fastest growth. Asia-Pacific accounted for 25 per cent of GSSSB issuance, driven by new market participants like India.
The report also highlights the diversification of currencies in the GSSSB market, with the euro and US dollar representing less than 70 per cent of overall issuance. This indicates increased participation from more economies and rising demand from local investors. Emerging market issuers are issuing bonds in their local currencies.
The forecast predicts moderate growth in 2024 for climate transition and blue bond labels in the GSSSB market. Transition bonds are expected to have their strongest year on record, providing access to the sustainable bond market for sectors that do not qualify for green bonds. Blue bonds, a subset of green bonds, are also expected to have a significant impact in 2024, driven by increasing global interest in preserving and restoring marine ecosystems.
