Globally, the number of green bonds issued by companies last year was lower than expected, totalling approximately $162 billion, up by only about 4% from 2017. This is because markets in general were volatile, the number of new issuers slowed and emerging market companies were actively trying to lower their debt levels instead of issue more.
Meanwhile, the number of green bond issuers diversifying into sustainability bonds – loans used to make a positive contribution to social as well as environmental solutions, compared with green bonds’ focus on environmental issues – soared by 87% last year. Sub-sovereign issuers (such as regional, provincial and municipal governments) led the way here, using the proceeds to finance a more diversified portfolio of environmental and social projects, including affordable housing and access to finance.
Regionally, Europe remained the largest issuer in the market, accounting for about 45% of total 2018 issuance. The share of green bonds issued by US-based companies fell from 20% in 2017 to 11% in 2018, reflecting the continued lack of engagement from American borrowers.
We remain cautiously optimistic for 2019 and expect continued growth in green bond issuance. While some of the challenges highlighted above are expected to prevail in 2019, we believe that positive developments – such as increased economic and political engagement on environmental issues in Europe and the ASEAN region, coupled with intensifying competition among companies to position themselves as ESG leaders – will outweigh the lingering headwinds and result in another year of positive, albeit moderate, growth in green bond issuance.