Climate Bonds Initiative is an international organisation dedicated to mobilising global capital for climate action. Partners include the Luxembourg Stock Exchange and the Luxembourg Green Exchange.

Among its actions is the publication of an annual study on the state of the sustainable debt market, the Sustainable Debt: Global State of the Market, now in its eleventh edition. This has been expanded to cover transition bonds and sustainability bonds, in addition to the traditional green, social and sustainable bonds. Sustainability bonds--the newest of the sustainable debt instruments--are not intended to finance infrastructure, but to finance an issuer’s sustainability strategy.

According to the Climate Bonds Initiative, the sustainable debt market thus defined has reached $2.8trn spread over just over 16,000 debt instruments. The market has benefited from concerns about post-pandemic inflation and the timing of withdrawal of central bank support. “Issuers flocked to the market to issue or refinance at the prevailing low rates, and the sustainable debt market continued to thrive,” says Climate Bonds Initiative.

$1.6trn in green bonds

Green bonds account for the lion's share of the market, with a cumulative outstanding amount of $1.6trn. This is an increase of 46% compared to $750.5bn in 2020. Over the year, the volume of issuance has for the first time in history passed the $500bn mark--$522.7bn (+75% compared to 2020)--and represents 49% of the market.

73% of these bonds were issued in developed markets, 21% in developing countries and 4% by supranational issuers. Europe alone accounted for 50% of issuance. The United States was the most active country with $81.9bn issued (+63%) for a cumulative total of $304bn. China issued $68.1bn in green bonds.

The majority of these funds were used in the energy, buildings and transport sectors, which together accounted for 81% of the financing.

Thematic sustainability bonds continue to grow. They reached a record $192.9bn of issuance in 2021 (+19%), contributing to 18% of the total volume of sustainability bond issuance for the year.

This segment was driven by the World Bank, which alone issued $41.6bn. Supranational issues accounted for 49% of the amount for 2021. Cumulative outstanding bonds reached $520.5bn.

Social bonds explode

The cumulative outstanding amount of social bonds was $538.8bn. In 2021, the investment theme raised $223.3bn. This is a drop of 13% compared to 2020. This was a normalisation for a sector that exploded with the covid crisis. Europe accounted for 46% of the sums issued in a market dominated by sovereign issuers. France alone issued $77.5bn in social bonds.

This year, the Climate Bonds Initiative has added two new categories to its report: transition bonds and sustainability bonds. The idea is to focus on transition financing.

Sustainability bonds are used to finance an issuer’s sustainability strategy.

This is the most dynamic segment in 2021. Issuance reached $118.8 billion, up 941%. The cumulative amount outstanding reached $135bn.

Non-financial companies accounted for 89.5% of issuance in 2021. Europe was the largest market with $67.8bn of bonds issued--a market share of 55.7%--followed by the Asia-Pacific region (21.2% market share).

The transition bond market is still relatively new and has continued to grow, with 13 bonds from ten issuers, worth $4.4bn in 2021.

Originally published in French by and translated for Delano