Sustainability

Sustainable Finance Round Up: July 2023

Aug. 21, 2023 - 2 minutes

Looking upwards through trees to tall office buildings

Our Monthly Round Up Series delivers clients with digestible trends and take-aways on sustainable debt market movement.

Market Musings

July sustainable bond issuance of U$46B marked the lowest monthly total since February 2020 despite an active primary debt market. This performance is generally in line with prior years as July and August have historically experienced a marked slowdown in sustainable bond issuance. Despite this pullback, sustainable bond issuance continues to outpace 2022 volumes by 9% and investor demand has remained steady suggesting YTD 2023 issuance of U$643B is on pace to exceed 2022's U$960B.

Tackling Energy Transition Heading into COP28

Capital providers, countries, and corporates alike are continuing to evaluate best practices for addressing credible transition pathways and the related transition financing. Leading up to COP28, the 2023 United Nations Climate Change Conference in December, we have already started to see a flurry of updates globally:

United Kingdom: Transition Plan Taskforce (TPT) — The U.K.'s 'gold standard' transition plan disclosure framework is expected to be published in October as work continues on sector-specific guidance for financial institutions, energy, food and agriculture, and metals and mining sectors.
Canada: Transition Taxonomy — The Taxonomy Roadmap Report released in March outlined recommendations for a Canadian green and transition finance taxonomy. The roadmap guides the process on labelling activities as 'green' or 'transition' and maps out the next phases for taxonomy development.
Sustainable Fitch Transition Assessment — Sustainable Fitch recently launched their Transition Assessment product, a methodology aimed at benchmarking, differentiating, and positioning companies on their path to net zero. This methodology tracks three main metrics looking at emissions targets, emissions reduction, and financial actions. While capital is increasingly flowing to green and transition activities in hard-to-abate sectors, the transition bond market remains lifeless and the market's appetite for such products is murky.

Sources: TD Securities, Bloomberg

Pie chart showing top issuing sustainable debt sectors in July 2023

Source: Bloomberg; Corporate/Government bond new issuance volume (excluding loans) as of 7/31/2023.
Source: Bloomberg; Corporate/Government new issuance volume across sustainable debt products (including loans) as of 7/31/2023 – note that sustainability-linked loan and green loan data is typically revised upwards with a 2 month lag.

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