Germany and Italy emerged as Europe’s top green bond issuers in Q3 2022, with future green bond issuance commitments and targets likely to be influenced by the upcoming United Nations Climate Conference COP27.
Germany leads the region with $15.89 billion in internationally aligned green bond issuance, according to data from the Climate Bonds Initiative, or CBI. This is a decrease of 7.6% from $17.2 billion. a year earlier, but up 55% from the $10.26 billion in the previous quarter.
Germany, Italy
Emissions in Germany were robust despite reduced volumes from government agencies, said Trevor Allen, head of sustainability research at BNP Paribas Markets 360.
“Germany’s track record can be explained by sustained sovereign volumes, outpacing France, strong performance by German banks, unlike other countries, and German corporates consistently outperforming 2021 volumes,” he said. noted Allen.
Italy had the second highest issuance among European countries, with $8.32 billion, ahead of France. This is a sharp increase from $220 million in the prior quarter and $600 million in the prior year.
Italy’s strong performance was mainly driven by a giant sovereign issue worth €6 billion in September, according to Sam Morton, head of European quality investment research at Invesco. Sustainable debt issuance has been accepted across Europe, but France and Germany are expected to remain the “locomotives” of the sustainable debt market in the region, with sovereign issuance being the main driver, Morton added.
“Italy will likely remain a large issuer of green/sustainable bonds, but we believe it is unlikely to maintain its recent growth trajectory,” Morton said.
Europe issued $35.23 billion in internationally aligned green bonds in the third quarter, up from $75.61 billion in the same period last year, according to CBI data. Despite the decline, Europe remained the region that contributed the most green debt globally during the quarter.
Sustainability Bonds
S&P Global Ratings expects sustainability-linked bonds, or SLBs, to maintain their sequence as the fastest-growing asset class in the environmental, social and governance debt market despite deteriorating credit conditions until present this year, and also expects green bonds to remain the most popular type of bond, the agency said in a Sept. 20 report. Unlike traditional green bonds, green bonds are not earmarked for specific environmental or social projects, thus offering more flexibility to issuers.
“While sustainable debt issuance is a tool to help economies achieve net zero goals, we do not believe that the temporary decline in emissions seen in 2022 is likely to have a significant impact on achieving the goals. net zero,” Morton said.
But SLB issuance is likely to pick up eventually, driven primarily by companies adopting “greener” practices, according to Markets 360’s Allen. halo of the COP27 climate summit, which will be held from November 6 to 18.
“At the time of COP27, we would like to see greater commitments and targets announced by EU sovereigns for 2023,” Allen said.
“The energy crisis has underscored the importance of developing renewable energy, improving energy efficiency and scaling the circularity of materials,” Allen said, noting that the sense of urgency drove governments to think more deeply about how they will meet their net zero commitments.
Ratings expects 2025 to be a key year for sustainability bonds, as many issuers have tied their sustainability performance targets to this year.