The outperformance is mostly led by Europe, outpacing last year’s total issuance by 33%, according to BNP Paribas SA, the market’s biggest underwriter. That means climate-friendly bond sales are now closer than ever to the bank’s forecast of $600 billion by the year’s end.
The Inflation Reduction Act in the US has spurred a lot of investments, said Anne van Riel, BNP’s head of sustainable finance capital markets for the Americas. Some of it will get financed by the public bond market.
The European Union taxonomy, a classification framework of environmentally sustainable economic activities for investors, has also driven sales.
“We see much more demand from European investors for labeled transactions, so they can put it in their ESG funds and there’s increasingly more clarity on what that should look like,” van Riel said. “And issuers have been responding with green-labeled bonds to satisfy that demand.”
Additionally, green, sustainable, social and SLB bonds beat 2021 history in number of issues so far this year. The market has seen 2,599 issues with total volume at $729.9 billion for the first three quarters, according to data compiled by Bloomberg. The World Bank Group is the leading party for ESG issues.
It’s a turnaround from 2022, where general corporate markets were taking a hit. But the rebound now is boosting the ESG-labeled markets, according to van Riel.