Demand for ESG investing will drive record growth in sustainable bonds

Thanks to fast-growing demand for environmental, social and governance (ESG) investing, global sustainable bond issuance is expected to hit record highs in 2020, says Moody’s Investors Service.

In a new report, Moody’s projected that US$400 billion worth of new green, social and sustainability bonds will be issued this year, up by 24% from last year, which was also a record year (US$323 billion).

“Across the financial sector, market participants are increasingly integrating environmental, social and governance (ESG) considerations and sustainability,” said Matthew Kuchtyak, an analyst at Moody’s.

He added that governments and regulators are providing “greater structure and clarity” to the sustainable finance market as their focus on climate change and sustainability grows.

Moody’s forecasted that green bond issuance will reach US$300 billion this year, up from US$258 billion last year.

Additionally, social and sustainability bonds were forecasted to raise US$25 billion and US$75 billion, respectively in 2020, up from US$17 billion and US$48 billion.

“As the social and sustainability bond markets grow and mature, Moody’s expects issuance from these segments to become more diversified in terms of sector and region, similar to trends seen in the green bond market,” it said.

In particular, Moody’s expects issuance from sustainability-themed labels to accelerate.

“Continued growth and diversification of these markets will be accompanied by innovation in new labels and structures, particularly with respect to transition bonds and sustainability-linked bonds and loans,” it said.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.