Sustainable bond issuances are expected to hit a record US$1.35 trillion globally in 2022, although growth is expected to slow amid a maturing market and monetary tightening, Moody’s ESG Solutions said. The volume of green, social, sustainability and sustainability-linked (GSSS) bonds was projected to grow 36 per cent this year, slowing from the 64 per cent growth rate seen last year, when the issuance totalled US$992 billion, according to a report by Moody’s ESG Solutions. Despite the moderation in growth, “sustainable bonds will continue to rise as a share of global bond issuance, potentially reaching 15 per cent of total issuance this year”, Matthew Kuchtyak, vice-president of ESG outreach and research at Moody’s ESG Solutions, said in a statement on Monday evening. “Our projections take into consideration expectations of gradually declining growth rates over time as the market grows and matures, particularly in more established markets, as well as potential headwinds for overall global debt issuance in 2022 in a potentially tightening monetary policy environment,” Kuchtyak said in the report, which was published on January 31 along with analyst Erika Bruce. As the number of issuers embedding sustainability strategies into their capital market plans remains on an upwards trajectory, GSSS bonds are likely to continue surging as a share of global issuance volumes, according to the report. Can Hong Kong help cut through the alphabet soup of global ESG rules? Sustainable bonds accounted for 11.3 per cent of total global bond issuance in 2021, up from 6.7 per cent in 2020, according to Moody’s ESG Solutions. The issuance of sustainability-linked bonds was expected to see the strongest growth, more than doubling in 2022 to US$200 billion after a breakout year in 2021, when issuance surged to US$90 billion from US$9 billion in 2020, according to the report. “As investors have increasingly focused on issuers’ overall environmental, social and governance (ESG) credentials and how their bond financing aligns with their sustainability objectives, issuers have begun to turn to sustainability-linked instruments to appeal to investors while maintaining the flexibility of general corporate purposes borrowing,” said Moody’s ESG Solutions. Time to include ESG standards in new approach to property valuation Meanwhile, the ESG-labelled bond market in Asia-Pacific reached around US$75-80 billion last year, with China accounting for around half of that, according to Joseph Pepping, head of the Asia-Pacific debt capital markets syndicate at Bank of America (BofA). This market was forecast to reach around US$100 billion this year. The regional sustainable bond market has “grown much faster than the market was expecting two years ago”, said Pepping. “I don’t see that growth slowing down in the near term.” Emerging market volumes are expected to continue to surge after more than doubling in 2021, due to high ESG risk exposures, according to Moody’s ESG Solutions. ESG jobs are the hottest as Hong Kong steps up to comply with disclosures Chinese GSSS bond issuance – historically the primary driver of emerging market issuance – rose to US$63 billion in 2021 from just US$19 billion the previous year, according to Moody’s ESG Solutions. Full-year volumes easily eclipsed the previous record of US$39 billion of Chinese GSSS bond issuances in 2018. Chinese issuance represented 46 per cent of total emerging market volumes in 2021. The key instruments in the Chinese market are green and sustainability bonds, and their growth will be driven by a combination of supporting policies, such as China’s pledge to become carbon neutral by 2060, and capital continuing to flow into the market as investors continue to turn to ESG investment themes, said BofA’s Pepping. With the current growth trajectory, green investments could reach US$1 trillion in 2022, a long held milestone for green finance, according to the non-profit Climate Bonds Initiative (CBI). Combined with an estimated total of US$1 trillion to US$1.2 trillion in social, sustainability, sustainability-linked bonds and transition finance, CBI forecasts the sustainable market could reach between US$1.9 trillion and US$2.2 trillion in 2022, according to a report on January 31.