Green Bond Sales Expected to Grow By 30% in 2023

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According to Barclays, global sales of corporate bonds with environmental, social, and governance (ESG) criteria will exceed $460 billion this year, after the asset class suffered its first setback in 2022 as rising interest rates weighed on credit markets.

ESG bond volumes increased in recent years but fell by 22% in 2022, as corporations faced much higher borrowing costs as a result of significant monetary tightening operations by global central banks combating inflation. According to a credit research note from Barclays, corporate ESG bond issuance dropped to $362 billion last year from $461 billion the previous year. The lender estimates that this year, ESG bond sales will increase by 30% due primarily to the sale of green bonds.

Charlotte Edwards, Head of ESG FICC Research at Barclays, stated, “We expect green bond issuance to continue to dominate the market thanks to strong demand and a long list of green projects that need funding as companies put decarbonization plans into action.”

Globally, countries and governments have a mountain to climb when it comes to hitting 2030 carbon reduction targets. The International Energy Agency estimates shifting the planet’s energy system away from fuels that emit greenhouse gases will cost $2 trillion a year by 2030.

Green bond ESG debt options have yet to be challenged by sustainability-linked bonds, which impose penalties on borrowers who fail to reach certain targets. Green bonds can provide companies with cheaper funding, according to Barclays, and their relative appeal has grown as investors questioned the key metrics used in less mature sustainability-linked securities.