The first annual USD trillion in green issuance could arrive as early as this year. This is according to the latest flagship Annual Sustainable Debt Global State of the Market Report released by Climate Bonds Initiative, drawing on the latest data from Climate Bonds’ Market Intelligence. The report shows that Green Social and Sustainability (GSS+) themed debt rose to almost USD1.1tn in 2021, marking a 57% increase upon 2020 volumes. In addition, Annual green bond issuance also broke through the half-trillion mark for the first time, ending 2021 at USD522.7bn, a 75% increase on prior year volumes. Next milestone for the green finance is set to an annual $5 trillion by 2025.  

The Sustainable Debt Global State of the Market (2021) Report is the 11th iteration of a leading series and offers a comprehensive analysis available of the green, social and sustainability (GSS) markets, plus sustainability-linked bonds (SLBs), and transition bonds to the end of 2021. 

The trillion dollars issued across sustainable markets suggests that capital is beginning to shift at scale – but more is needed. This year we hope to see a trillion raised in green bonds alone, rising to $5 trillion by 2025.”

Sean Kidney, CEO of Climate Bonds Initiative

Major findings

Climate Bonds captured GSS+ themed debt amounting to almost USD1.1tn in 2021, marking a 57% increase on the 2020 figure of USD700bn. The addition of 5.999 individual instruments contributed 35% to the cumulative total of 16,697. Green was the largest theme surpassing the half-trillion mark to reach a record USD522.7bn.  

Since market inception in 2007, Climate Bonds has recorded more than 16,000 GSS+ debt instruments with a cumulative volume of USD2.8tn. The green theme is the largest with a total of USD1.6tn, followed by social at USD539bn, sustainability at USD521bn and the rapidly growing contributions from SLBs and transition bonds at USD135bn and USD9.6bn respectively.  

September was the busiest month on record, attracting GSS+ volumes of USD15.4bn. This included seven sovereigns, who between them priced eight bonds worth almost USD30bn. 

The SLB market gained momentum and was the fastest growing theme amassing a USD118.8bn volume with YoY growth of 941%. 

Green Bonds: Half a Trillion in 2021

Annual green bond issuance broke through the half-trillion mark for the first time, ending 2021 at USD522.7bn, a 75% increase on prior year volumes. Climate Bonds Market Intelligence forecasted that the first annual trillion in green issuance could arrive in 2022 and ran a stakeholder survey affirming that 2022 would mark a realisation of a long-held market milestone.

At a Glance 

The green theme attracted 839 issuers during the year as the average size of individual green bonds increased by more than 50% to reach USD250m.

Europe was the most prolific region, with cumulative issuance reaching USD758bn by year end.

The Sovereign Green Bond Club continued to expand its membership. Eleven countries added USD72.8bn in new bonds or taps. Italy, the UK, Serbia, Spain, and South Korean issued debut Sovereign green bonds. 

Issuers were keen to fund upcoming liabilities while interest rates remained low and September was the most prolific month in the history of the green bond market (USD86bn).  

Three quarters (73%) of the 2021 green bond volume originated from developed markets (DM) while 21% came from EM and just 4% was issued by supranational issuers (SNAT). The EM contribution increased from 17% in 2020, with extraordinary growth from development banks (378%), financial (324%) and non-financial corporate (278%) issuers. 

Green bond issuance in the Asia-Pacific region (129%) experienced the strongest growth followed by SNAT (102%). 

The USA maintained its position as the most prolific source of green bonds. Volumes increased by 63% to USD81.9 from USD50.3bn in 2020. The cumulative total stands at USD304bn, which is 50% larger than China, the next largest country source (USD199bn). 

Private sector issuance recovered in 2021 with strong growth coming from financial corporate (143%) and non-financial corporate (111%) issuers. At the end of 2021, these two issuer types together represented 44% of cumulative green bond volumes. Sovereign also experienced triple digit growth of 111% on the period, and now contributes 10% to cumulative volumes. 

Energy, Buildings, and Transport were the three largest UoP categories, collectively contributing 81% to the 2021 total. 

Most green bonds (86%) added to the Climate Bonds Green Bond Database in 2021 had external reviews.

Sustainability Bonds

Sustainability volumes reached USD200.2bn in 2021, a 23% increase on the USD162.5bn witnessed 2020. In 2021, Climate Bonds captured 287 issuer names, a 184% increase when compared to 2020. The average size of each instrument declined to USD188m from USD310m in 2020. The number of countries issuing in 2021 grew 84% YOY to reach 46.

Social Bonds

Social bond issuance has skyrocketed since the outbreak of COVID-19 in early 2020. Issuance in 2021 was slightly more subdued, with volumes reaching 223.2bn, a decline of 13% YOY.

While the number of new instruments more than doubled (2555 in 2021, a 102% rise from the 1265 instruments issued in 2020) the average size of each bond more than halved (USD87m average in 2021 down from USD201.7m).

Sustainability-linked and Transition Bonds 

The SLB markets went from strength to strength in 2021 with a volume of USD118.8bn, representing an expansion of 941% on last year’s total of USD11.4bn. The average size of each instrument was relatively large at USD428.8bn.

The transition bond market is still new and continued to grow, with 12 bonds coming from nine issuers in 2021, amounting to a volume of USD4.4bn.  The transition bond market grew more than 33% YOY to a cumulative USD9.6bn.

“2021 saw a new record of global sustainable debt issuances, a growth that was reflected on the Luxembourg Green Exchange. As an example, we welcomed on our exchange and LGX the largest green bond ever issued, the EUR 12 billion inaugural green bond issued by the European Commission as part of the NextGenerationEU recovery instrument. We also noticed a steep increase in SLB issuances last year, a trend which we expect will continue in 2022 and potentially result in a sovereign SLB issuance. Beyond reorienting capital flows towards sustainable development projects, the priority is now to make sure the funding reaches the regions of the world where it is needed the most.”

Julie Becker, CEO of the Luxembourg Stock Exchange

sustainable debt

Source: Climate Bonds