Sustainable bond issuance is forecast to see $1 trillion dollar of issuance in 2024, for the first time since the record-breaking total in 2021, according to Environmental Finance Data (EF Data).
EF Data research analyst Nimrod Iritz forecasts that 2024 green, social, sustainability, sustainability-linked and transition bond issuance could reach $1.13 trillion – potentially resulting in 2024 issuance surpassing the $1.08 trillion record set in 2021.
The figure follows EF Data publishing a $982 billion 2023 issuance estimate in the Sustainable Bonds Insight (SBI) report in February 2023 which proved to be an exactly accurate forecast of the $982 billion raised in 2023. The 2024 edition of the SBI will be published later this month.
The EF Data team came to the estimate using statistical analysis, after determining with 80% confidence that overall issuance will be between $866 billion and $1.4 trillion in 2024.
Iritz told Environmental Finance that evolving interest rate expectations could result in issuance volumes being stronger towards the end of 2024, however.
"After the ultra-loose monetary policies introduced as a response to the Covid-19 pandemic and the energy crisis, central banks hiked interest rates at the fastest pace ever in response to the soaring global inflation experienced in 2022 and 2023," he said.
"Interest rates have now remained at an elevated level for some time and there is growing speculation that we can see the first interest rate cuts at the end of the first six months of 2024.
"This may lead issuers to delay their bond issuances to the second half of the year to benefit from possible lower interest rates."
EF Data forecasts that green bond issuance could experience another record-breaking year, with $654 billion estimated for 2024 – 14% higher than the record $575 billion raised in 2023 by the oldest sustainable bond label.
| EF Data 2024 sustainable bond issuance forecast by label | |||||
|---|---|---|---|---|---|
| 2024 (forecast) | YoY Change | 2023 | 2022 | 2021 | |
| Green | $654 billion | 14% | $575 billion | $523 billion | $569 billion |
| Social | $214 billion | 21% | $177 billion | $171 billion | $213 billion |
| Sustainability | $182 billion | 13% | $160 billion | $150 billion | $198 billion |
| Sustainability-linked | $82 billion | 24% | $66 billion | $77 billion | $97 billion |
| Transition | $3 billion | - | $3.1 billion | $3.5 billion | $4.3 billion |
| Total | $1.13 trillion | 16% | $982 billion | $925 billion | $1.08 trillion |
| Source: Environmental Finance Data | |||||
"I think green bonds will continue to have a strong year in 2024, boosted by sovereign issuers, mature and well-regarded principles, and new emerging standards – such as the EU Green Bond Standard," he said.
After sovereign sustainable bond issuance reached new highs in 2023, Environmental Finance has already reported that 2024 has got off to a strong start for government issuance – in particular, through green bonds.
EF Data also forecasts that social bonds could approach record issuance in 2024 of around $214 billion. But, Iritz told Environmental Finance that there could be more of a tussle between social and sustainability bonds, which could equally result in the sustainability label – which is a hybrid of green and social projects – setting its own record around $200 billion or more.
"Sustainability bond issuance could hover around $200 billion in 2024 at the expense of social bonds, simply because many development banks are shifting to those instruments from social bonds," he said.
Sustainability-linked bonds could also return to growth in 2024 after two torrid years in which issuance has contracted significantly as scrutiny of the performance-based instrument has increased.
Although forecasting a flat issuance volume for transition bonds in 2024 based on historic trends, Iritz said the expected arrival of Japan in the market with its potentially large sovereign transition bond could see the instrument "overachieve" the forecast in 2024.
Iritz will be discussing sustainable debt trends for the fourth quarter of 2023 in a webinar with EF Data's Guy Richardson today at 3pm GMT. The free webinar is available here, and will also be available after on demand.