Sustainability

Sustainable Finance Round Up Part 1: 2022 in Review

By: Bridget Realmuto LaPerla

March 3, 2023 - 2 minutes

Canadian flag with the Rocky Mountains in the background

2022 saw historic interest rate hikes across developed economies, a war-induced energy crisis in Europe, and rampant inflation. While many anticipated these interest rate hikes, causing primary issuance volumes to fall in 2022, the energy crisis added to the challenging market backdrop. By year end, there were five clear takeaways from sustainable debt and carbon markets:

Key Findings

Sustainable bonds gained on the broader bond market
The sustainable bond market (green, social, sustainability, and sustainability-linked bonds) was 15% (US$983bn) of the global bond market across currencies in 2022, continuing a multiyear positive trend, up from 4% (US$217bn) in 2018. In 2022, issuers and investors continued to position themselves for success in decarbonizing economies.

Green debt dominated
Green labeled bonds and loans increased their market share as a proportion of the overall green, social, sustainability, and sustainability-linked bond and loan (GSSS) market. While issuers leaned into established green debt products, sustainability-linked products continued to mature amidst scrutiny of targets and challenging market conditions.¹

Clarity from currency
Sustainable bonds increased popularity amongst issuers in Europe and the US markets. Even through the 2022 market correction, we saw USD denominated sustainable bond volumes increase to 15% (US$280bn) of the broader USD denominated bond market. Similarly, in Europe, EUR denominated sustainable bonds increased to 22% (€395bn) of the EUR denominated broader bond market volume.²

Sector stability and stars
SSAs and Financials continued to lead volumes in 2022. Within corporates, the communications sector saw the largest increase from 2021, with a 44% bump in sustainable debt volumes.²

Combination of carrot and stick expands carbon markets
Global compliance and voluntary market developments incentivized participation in the near-term and increased the need to manage carbon-related risks in the long-term.

TDS ESG Solutions, 2023, TDS Market Musings, January 2023
Bloomberg, 2023

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Bridget Realmuto LaPerla
Director, ESG Solutions

Biography

Bridget joined the ESG Solutions team as a Director in July 2022. Based in Boston, she is a published ESG investing specialist with buy- and sell-side experience, providing ESG advice and solutions to corporate and institutional clients. Prior to joining TD, Bridget was the Co-Head of ESG Research at State Street Associates, presenting insights with academic partners and leading the bank's client engagement on ESG market signals. Her research is published in several peer-reviewed journals.