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Alternative Market Briefing

S&P slashes 2022 sustainable bond forecast by 16% on worsening market conditions

Monday, September 26, 2022

Laxman Pai, Opalesque Asia:

S&P has slashed its 2022 forecast for the issuance of the green, social, sustainability, and sustainability-linked bonds (GSSSB) to US$865bn from an anticipated US$1.5 trillion in February and is now expecting a 16% drop from last year's total of US$1 trillion.

In an analysis drawn from the Environmental Finance's Bond Database, the report said that global bond markets had experienced "weaker issuance" trends in the first half of the year and said these were "likely to continue" in H2.

This downgrade reflected the tougher market for bonds globally, not just ESG or sustainably linked bonds. Before this year, GSSSB issuance has steadily grown in recent years, surpassing the $3trn mark in issuance outstanding in the first half of 2022.

After a 19% drop in ESG-labelled bond issuance in the first half of 2022 - to US$460bn from US$566bn a year earlier - S&P is expecting a slight pickup in issuance, despite worsening credit conditions.

Among ESG-labelled bonds, sustainability-linked bonds are the only GSSSB type to demonstrate growth in 2022, up 18% year on year.

Financial services is the only sector to experience GSSSB issuance growth in 2022, up 11%. Annual issuance has risen 4x since 2018.

The largest share of ESG-labelled bond issuance still comes from Europe, which had 45% of global deals in the first half, but the Asia-Pacific is seeing strong growth and accounted for 23% of the market so far in 2022 wit......................

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