Green Bonds on Course for $1 Trillion in 2024: Climate Bonds Certified Issuance Grows: Strong Demand for Best Practice and Standards
The first quarter of 2024 was the most prolific on record for sustainable finance volumes, according to the Climate Bonds Initiative (Climate Bonds) latest Quarterly Market Report released today.
USD272.7bn of aligned green, social, sustainability, sustainability-linked and transition (GSS+) bond volume was added in the first quarter (Q1) of 2024, 15% more than the USD237.2bn recorded in Q1 2023, and 41% more than the USD193bn from Q4 2023.
Green bonds made the largest contribution and hit a new quarterly record, with USD195.9bn amassed in the opening months of the year. Lifetime green bond volume crossed the USD3tn mark since market inception in 2006, contributing to cumulative volume of USD4.7tn GSS+ bonds.
Bonds meeting the requirements outlined in Climate Bonds’ screening methodology qualify for inclusion in the datasets and are classified as ‘aligned’. Labelled bonds for which there is not enough information to determine eligibility for dataset inclusion are classified as pending until sufficient disclosure is available to decide. The entire self-labelled sustainable issuance stands at just over USD5.7trillion with a total of USD358bn priced in 2024 alone, when including self-labelled issuance that does not register as aligned to Climate Bonds' database methodologies
Global GSS+ growth
All regions apart from Asia-Pacific exhibited growth year-on-year (YOY). Europe maintained its position as the largest regional source of aligned GSS+ volume, with USD149.5bn or 55% of the total priced in Q1. North America rebounded with a 68% increase YOY driven by an increase in deals from the green theme.
Africa’s presence spiked by 1692% YOY to USD4.9bn, with nine deals from seven issuers led by the African Development Bank (AfDB) (three deals with combined volume of USD3.1bn) and the Ivory Coast (USD1.1bn).
Certified Issuance: Setting the Benchmark for Market Best Practice
In line with the market's growth, Q1 2024 saw remarkable progress in Certified issuance under the Climate Bonds Standard, setting a high benchmark for best practice. Total Certified issuance reached USD20bn, bringing the cumulative total to USD 315 billion. This quarter featured 29 issuances from 11 countries, in 13 different currencies, spanning the energy, buildings, water infrastructure and transport sectors, highlighting the broadening appeal across the economy for sustainable finance.
Q1 saw many notable Certified issuances, but the long-time programmatic issuer Societe des Grands Projets (SdGP) in France leads the way. SdGP has been certifying its entire green EMTN programme since 2018, which includes 21 deals totalling EUR27bn. Their latest deal, which raised EUR1bn (USD1.08bn) for the all-electric Grand Paris Express metro project, was seen as the market's most sought-after green deal ever being 17 times oversubscribed.
Another highlight has been the issuance by Japan's Ministry of Economy, Trade and Industry (METI) of the world's first Climate Transition Bond. The two issuances totalling JPY1.6tn (USD10.6bn focused on transport, buildings, grids, and R&D, showcasing Japan's commitment to the promotion of innovation and sustainability.
The second largest Certified bond in Q1 was issued by the Queensland Treasury Corporation which raised AUD2.75bn (USD1.8bn) to finance the State’s water, transport and solar projects.
The Vadodara Municipal Corporation was the first municipality in India to obtain Certification for its green municipal bond of INR1bn (USD12.1m) for water sector improvements, which was 14 times oversubscribed, demonstrating strong investor confidence.
Long-time programmatic issuers the New York Metropolitan Transportation Authority and France's SNCF continued its participation in the market by issuing USD1.6bn and three bonds amounting to USD1.3bn, dedicated to low-carbon passenger transport projects, respectively.
Newsworthy Certified issuances in Q1 also came from Energie Baden-Württemberg AG in Germany which raised EUR500m (USD540m) for marine renewable projects. Huadian New Energy Group Corporation Limited in China, issued RMB2bn (USD278m) for solar and wind projects. Charter Hall, the Australian property group raised AUD2.2bn (USD1.4bn) to finance green buildings and Transpower New Zealand Limited raised CHF150m (USD170m) for electrical grids and storage projects.
These Certifications showcase the importance and expanding demand for best practice standards. The Climate Bonds Standard will continue to expand and improve the criteria for credible transitions in heavy industry, the agri-food industry, buildings, and the energy sectors. Using the globally applicable best-in-class Standard, Climate Bonds Certification confirms alignment with rigorous science-based environmental standards, promoting broad market participation. As we move forward, the growth and diversification of Certified issuances is expected to play a crucial role in advancing global climate goals. Find full database of Certified issuances here.
Milestone: Sovereign issuance surpasses half a trillion.
During Q1 2024, lifetime aligned sovereign GSS+ volume crossed the USD0.5tn mark, reaching USD538.3bn, and sustainable finance passed a milestone of 50 sovereign issuers, landing at 53. Of that total, 22 sovereign issuers contributed USD52.5bn in aligned volume in Q1 2024, 37% more than the USD38.4bn priced in the same period of 2023, and 24% over the USD42.4bn captured in Q4 2023.
New aligned deals with combined volume of USD32.2bn came from 11 issuers, while 16 issuers tapped existing bonds contributing USD20bn. Japan (USD10.6bn) and Romania (USD2.2bn) priced debut green bonds, while Ivory Coast (USD1.1bn) joined the GSS+ market with a sustainability deal.
France is the largest single issuer of green bonds, having amassed green liabilities of EUR70bn (USD78.6bn) by the end of Q1 2024. The government is committed to support a green transformation, evaluating all its expenditures against the six environmental objectives of the EU Taxonomy. More than 18% of its debt bears the green label.
In January 2024, France added a fourth point to its green yield curve with a EUR8bn (USD8.7bn) 2049 deal. The syndicated deal was originally destined to be EUR5bn, but was increased when the order book reached EUR98bn, covering the final deal size more than 12 times. The bond achieved spread compression of 2bp and obtained a greenium.
Overall, sovereign issuance made up 18% of issuance volumes in Q1 2024. The largest issuer type was non- financial corporates with 28% of the volume or USD76.7bn; this was dominated by the green theme (USD71bn).
The Last Word: The First Annual Trillion for Green Bonds?
After a record start to 2024, there's strong indication this will be a record year for green bonds and sustainable debt markets on the whole. But could we see the first of the annual trillion in green bonds arrive this year? The author of our Quarterly Market Reports thinks so.
Caroline Harrison, Director of Technical Development, Climate Bonds: ‘Sustainable finance has been quick off the blocks in 2024 and we could see a record year nearing $1trillion of green bonds alone. The sustained growth in this market reflects the enthusiasm of issuers to decarbonise their operations as swiftly as possible and seize the opportunities for growth. The leading role that sovereign issuers are taking in this space suggests that the urgency of the transition is being endorsed from the top down.’
Stay tuned for more market updates and don't forget to read the full report here.
'Til Next Time
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