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Freshfields Sustainability

| 1 minute read

Picking up the pieces – Ten trends in sustainable debt for 2023

A mere 12 months ago, sustainable finance was the name of the game. The year 2021 had seen a record of more than $1 trillion of sustainable bonds (which include green, social, sustainability, and sustainability-linked bonds) being issued, according to S&P Global. Market observers confidently predicted that global issuance volumes of such labelled bonds would surpass $1.5 trillion in 2022.

And then Russia invaded Ukraine.

Soaring energy prices and rising inflation prompted central banks across the world to put an end to a decade of low-interest rates. All of a sudden, issuers that had been able to tap the bond markets at prices close to zero found themselves struggling with heightened volatility and widening bond spreads.

As a result, global bond issuances fell across the board in 2022, and the sustainable bond market registered its first year-on-year decline, coming in at approximately $863 billion, according to Bloomberg. While sustainable bond volumes outperformed the wider bond market, that’s really just a nice way of saying that labelled bonds didn’t decline as much as conventional bonds.

So where does sustainable debt go from here?

In this client briefing we look back at what happened in 2022 and identify the ten trends in sustainable debt for 2023:

1. Green bonds remain the cornerstone of the market

2. SLBs are facing headwinds

3. Social and sustainability bonds are here to stay – and transition bonds are not dead yet

4. More sovereigns are making their debut in the sustainable debt market

5. The ESG backlash from both sides – with energy companies at the center 

6. Some issuers look to retail investors to sell their sustainable bonds

7. Blue, orange and rhino bonds – exotic sustainable bonds are thriving

8. The “greenium” debate continues

9. Market scrutiny is on the rise

10. Regulators are finally catching up

Click here to download the full briefing.

So where does sustainable debt go from here?