The volume of green, social and sustainable bonds issued in 2021 was higher than expected and Crédit Agricole CIB’s experts forecast a 50% increase in 2022.
Climate change is now a top priority on the agenda of all stakeholders. All energies are turned in the same direction, and at a steady pace, to make the energy transition a key component in the capital markets.
The pace of sustainable emissions is accelerating
The volume of sustainable issuance – green, social, sustainable and Sustainability-linked – in 2021 was higher than expected. 780 billion in mid-November(excluding US government and federal agency bond issues and US mortgage issues), an increase of almost 90% over last year. This growth was mainly driven by corporate issues, which accounted for nearly 60% of the volume issued.
Product diversification was the main driver of growth in 2021 and allowed many issuers to enter the sustainable bond market:
- Green bond issues remain in the majority, accounting for half of all sustainable issues;
- Sustainability-linked Bonds (« SLB ») have allowed new issuers and new sectors to enter the sustainable bond market. Mainly issued by non-financial corporates, they now account for about 10% of cumulative sustainable issuance since the beginning of the year, whereas they were still negligible last year;
- The volume of social programming has decreased compared to 2020, which had experienced strong growth in response to the pandemic.
The euro remains the main issuing currency and accounts for half of all sustainable issues.
Nearly €1 trillion in bond issues by 2022
Our projections for sustainable bond issuance show that corporates, sovereigns and agencies will continue to demonstrate that they are taking steps to combat climate change through a deep, liquid, and diversified sustainable bond market, and by seeking financing for this purpose through these instruments.
The estimated supply of sustainable bonds is expected to increase by 50% in 2022, to €1.2 trillion. GLA is expected to support this growth and account for 20% of future sustainable supply. The share of Euro-denominated issues is expected to decline to about 45%, while US dollar-denominated issues are expected to exceed 35% of total sustainable supply. Green bonds are expected to remain the most issued product, representing about 52% of the supply.
Although today it is largely driven by Europe – thanks to European climate change regulations – political and regulatory developments in other regions could further favor emissions from non-European players and in other currencies.
Evolution of sustainable bond issues and estimates for 2022 by type of issuer (in billions of Euros)
Overall estimate of sustainable bond issuance by product in 2022 (%)
The rise of sustainable bonds and the « greenium » momentum show investor appetite for green bonds over conventional bonds – however, more and more investors are looking beyond bond underlyings to focus on issuer strategies and positioning – the recent development of GLAs also reveals this dynamic.
According to Damien de Saint Germain, Head of Credit & Strategy Research at Crédit Agricole CIB: « Over time, we expect climate and energy transition issues to become a key component of the issuer risk premium demanded by investors. Whether it’s politicians, regulators, central banks, investors, companies or rating agencies…All actors are integrating climate issues into their priorities, analytical frameworks and economic models, accelerating the capital markets’ consideration of the effects of this transition. »
With a 6.5% market share at the end of 2020 (Bloomberg), Crédit Agricole CIB is one of the leaders in the green, social and sustainable bond market. Crédit Agricole CIB is a long-term player committed to promoting green finance with a coherent organization within the teams, from creation to distribution.
Source : www.ca-cib.fr/pressroom/actualites/perspectives-marche-obligations-vertes-sociales-durables-pour-2022