The sustainable debt market exceeded our forecasts during the first quarter of this year and the energy transition is accelerating. We now expect total sustainable bond issuance to exceed USD 1trn in 2021, driven by a significant increase in issuance of green and social bonds and a breakthrough for sustainability-linked debt. In the latest issue of SEB’s report The Green Bond, titled The Transition Takes Off, we take a closer look at the issuance development, and how the sustainable debt market is quickly broadening to embrace new types of financing solutions.
“With the first quarter of 2021 behind us, we are on track to exceed even our most optimistic scenario for the full year,” says Christopher Flensborg, Head of Climate & Sustainable Finance at SEB. “We now expect sustainable bond issuance of more than USD 1trn this year, which is 25% more than we expected in our most optimistic estimate at the start of the year.”
The first quarter of 2021 was a record quarter for the sustainable debt market, with USD 378bn of new issuance, representing 50% of the total market for 2020. It was driven by green and social bonds, with issuance of USD 150bn and USD 94.2bn, respectively.
At the same time, issuance of sustainability-linked bonds was more than ten times higher than in the same period last year and has already surpassed the total for 2020 while sustainability-linked loans doubled. These developments indicate that 2021 will be the break-out year for the sustainability-linked concept, both regarding loans and bonds.
“Funding is rising because the transition is gaining pace faster than anyone had anticipated,” says Thomas Thygesen, Head of Research, Climate & Sustainable Finance, at SEB. “2021 will see a significant increase in public investment in energy infrastructure, and we now see the first signs of a true disruption in energy-using sectors like autos.”
“The market is also broadening to embrace new financing solutions and new areas, such as gender equality and water,” says Lina Apsheva, co-editor of The Green Bond. “For investors, these bonds are an opportunity to align their investments to the SDGs as they implement ESG strategies.”
SEB, which together with the World Bank developed the green bond concept in 2007/2008, publishes the research publication The Green Bond six times a year. It strives to bring readers the latest insight into the world of sustainable finance through various themes. Even though the report covers all kinds of products and developments in the sustainable finance market, we have decided to keep its historic name – The Green Bond – as a tribute to our role as a pioneer of the green bond market. You can find The Green Bond report at sebgroup.com and here.