The Thriving Landscape of Sustainable Debt: Insights from Climate Bonds
As of June 30, 2024, Climate Bonds has reported a remarkable cumulative volume of USD 5.1 trillion in green, social, sustainability, sustainability-linked bonds (SLBs), and transition bonds—collectively referred to as GSS+. This milestone reflects the growing commitment of global markets to sustainable finance, as detailed in the Sustainable Debt Market Summary H1 2024. This report not only highlights the impressive growth of the GSS+ market but also provides a comprehensive breakdown of labelled bond markets, showcasing the increasing interest and investment in sustainable initiatives.
A Surge in Global Debt Issuance
Despite the backdrop of higher-than-expected global interest rates entering 2024, the overall global debt issuance has surged to USD 13.2 trillion in the first half of the year, marking a significant 35% increase from USD 9.8 trillion in H1 2023. This growth is particularly noteworthy in the GSS+ market, which is on track to surpass the annual record of USD 1 trillion set in 2021. In H1 2024 alone, USD 554 billion of aligned GSS+ volume was recorded, representing a 7% year-on-year increase compared to the same period in 2023. Green bonds dominated this volume, accounting for 70% with USD 385.1 billion, while sustainability and social bonds contributed USD 93.9 billion (17%) and USD 70.5 billion (13%), respectively.
France: A Leader in Sustainable Finance
In a year marked by the Paris 2024 Olympics, France has emerged as a frontrunner in sustainable finance. Since hosting the UN Climate Change Conference (COP21) in 2015, the country has made significant strides in sustainable finance policy, leading to substantial growth in its GSS+ market. By the end of H1 2024, France ranked as the third-largest source of cumulative aligned GSS+ volume, with USD 542.9 billion, trailing only supranational issuances (USD 763.2 billion) and the USA (USD 714.6 billion).
France’s leadership is particularly evident in the social bond sector, where it holds the title of the largest source of aligned social deals, amounting to USD 216.2 billion. This achievement is largely attributed to the Caisse d’amortissement de la Dette Sociale (CADES), which has issued over USD 143.3 billion in aligned social bonds, making it the largest issuer in this category. With the momentum building in labelled bond markets, France is poised for a record year in GSS+ volumes.
The Evolution of French GSS+ Deals
The journey of GSS+ deals in France began in earnest in 2012, with initial issuances from local government entities and corporate players. France made history in 2017 by becoming the first core sovereign borrower to issue a green bond. This early adoption has paved the way for a robust market, with 22 additional French issuers pricing aligned social deals by mid-2024. The commitment to sustainability is further exemplified by the ambitious environmental objectives set for the upcoming Paris Olympics, which aim to minimize environmental impact while maximizing social and economic benefits.
A notable example of this commitment is the EUR 1 billion, 25-year green bond issued by the Société des Grands Projets to finance the Grand Paris Express, a major rapid passenger transport project. This initiative is expected to significantly enhance public transport infrastructure in the Paris region, aligning with the sustainability goals of the 2024 Olympics.
Spotlight on Steel Green Bond Issuance
In a promising development for the hard-to-abate sectors, Climate Bonds has observed a remarkable 166% surge in aligned green bond issuance from steel and cement companies. This increase is accompanied by the fact that 57% of the 21 assessed companies have established credible transition plans. To facilitate investment in these sectors, Climate Bonds has developed tools and guidance, including hard-to-abate sector criteria and transition plan guidance, as part of its Certification programme.
The introduction of the Transition Plan Monitor (TPM) aims to assess the quality of entity-level transition plans, with steel and cement being the first sectors analyzed. This initiative underscores the importance of transparency and accountability in the transition to a low-carbon economy.
A New Era in Data Analysis
At the core of Climate Bonds’ initiatives is a commitment to data analysis, which is crucial for understanding market trends and driving sustainable finance. To enhance its data management capabilities, Climate Bonds has partnered with Montrose Software, a dynamic firm known for delivering tailored solutions to global market leaders. This collaboration aims to optimize data offerings and improve the quality and responsiveness of Climate Bonds’ data services.
The ongoing development of a new Market Information Portal (MIP) will streamline processes and workflows, allowing for more efficient data delivery. This initiative not only supports Climate Bonds’ objectives but also positions the organization to leverage future value from its specialized data, enhancing its ability to respond to market needs.
Conclusion
The landscape of sustainable finance is evolving rapidly, with Climate Bonds at the forefront of this transformation. The impressive growth of the GSS+ market, particularly in France, highlights the increasing commitment of nations and organizations to sustainable development. As we move forward, the integration of robust data analysis and innovative financial instruments will play a pivotal role in shaping a sustainable future. Stay tuned for more insights and developments from Climate Bonds as we continue to navigate this exciting journey towards a greener economy.