- Total issuance down 19% year on year to $231.7 bln
- Compares to a 5% decline in broad-market issuance
- Green bond issuance down 7% on the year – Refinitiv
In the first quarter, global sustainable bond issuance flattened faster than the broader market, struck by a surge in market volatility following tightening monetary policy globally and Russia’s invasion of Ukraine.
Data from Refinitiv showed that the slowdown was preceded by the record issuance of bonds linked to social or environmental goals in 2021.
During the first quarter of 2022, total bonds issued by companies with a sustainable business model, such as renewable energy, as well as the issuance of green, social, and sustainability bonds, summed up to $231.7 billion, a 19% drop over the last year.
Over the same period, issuance across the broader market fell 5% to $2.49 trillion. The first quarter saw signs of tightening across the globe even as the ultra-easy monetary policy of the U.S. Federal Reserve and other central banks has long helped assets of all stripes.
David Falk, fixed income portfolio manager at Shelton Capital Management said:
“Certainty of Fed rate hikes and asset sales, tangible evidence of price inflation and the Russian/Ukraine conflict, collectively brought fear to investors in the fixed income markets in the first quarter of 2022.”
Issuance of green bonds, where the proceeds are used for a specific environmentally friendly project, dropped 7% to $110.4 billion in the first quarter from the previous year.
Renewable projects were made a tougher sell due to inflationary pressures, which have been intensified by the conflict in Ukraine, Andrew Poreda, senior ESG research analyst at Sage Advisory Services said.
He added that these price hikes across the renewable energy value chain:
“Will cause headwinds for new projects over the near-term, so (the level of issuance is) not surprising when looking at Q1 figures”.
Funds for projects with positive social outcomes such as improving health or providing affordable housing issuance are raised through social bonds, which saw issuance drop to $44 billion, a 55% decline over last year.
Sage Advisory Services’ Poreda stated:
“The lack of new social bonds coming to market was mostly anticipated, as the rise of new issuance over the past few years had a heavy tie to COVID-19-related initiatives.”
The top three book runners of global green bond issuance in the first quarter were JPMorgan, BNP Paribas SA, and BofA Securities, according to market data.