Skip to content

Sustainable finance sees cautious retreat amid wider volatility

Lucille Jones
Lucille Jones
Deals Intelligence Analyst

Along with the rest of the capital markets, sustainable finance has seen reduced activity levels so far in 2022, with declines across all categories of sustainable bonds, and equity issuance. However, the sustainable loan market has proven resilient, and a bounce-back in equity issuance in Q3 signals Asia-Pacific’s emergence as a major player on the sustainable capital stage.


  1. In the first nine months of 2022, sustainable finance bonds have returned to pre-pandemic levels, falling by 26 percent compared with the same period in 2021.
  2. Sustainable loans have held up well despite wider uncertainty, with issuance for the first nine months of 2022 just 3 percent lower than 2021.
  3. Asia-Pacific has bolstered sustainable equity issuance during the nine months of 2022 and is responsible for three-quarters of sustainable equity capital markets activity during the period.

For more data-driven insights in your Inbox, subscribe to the Refinitiv Perspectives weekly newsletter.

In the first nine months of 2022, sustainable finance bonds raised $586bn, 26 percent less than the same period last year, and the first year-on-year decline since records began.

The retreat continued to gather pace through the third quarter of 2022, with the July-to-September period 17 percent lower than the previous three months.

As a result, the market for sustainable finance bonds were now around the levels witnessed in late 2019 and early 2020, prior to pandemic-related issuance.

However, given a broader retreat from capital raisings in the face of macro-economic volatility, sustainable debt instruments account for a healthy 9 percent of overall DCM activity so far in 2022, down just one percentage point from last year’s high.

Designed with the future of investment banking in mind, and in a rapidly changing and competitive market, Refinitiv Workspace delivers the content and functionality you need

Green bonds still lead DCM sustainability

Green bonds continue to be the most popular type of sustainable debt transaction, raising $312bn in the first nine months of 2022, a relatively modest 13 percent fall year-on-year.

The latest recent trend line is more precipitous, with a 27 percent drop in green bond issuance from Q2 to Q3, dipping below $100 billion for the first time since the fourth quarter of 2020.

By number of issues, green bonds were down 18 percent year-on-year.

Social bonds have had a roller-coaster ride in recent years, briefly spiking in early 2021, while the first nine months of 2022 have seen issuance fall 56 percent, year-on-year.

Sustainability bond issuance raised $113bn during the first nine months of 2022, a 25 percent decline compared to the first nine months of last year, and 18 percent down by number year-on-year, to mark a two-year low.

Proceeds raised by sustainable companies were broadly flat, with a slight decrease by number of issues. Corporates in general increased their share of the sustainable bond market, up from 55 percent to 59 percent so far in 2022.

Europe remains the largest market for sustainable finance bonds for the first nine months of 2022, taking just over half the market, to leave 22 percent for Asia Pacific and 19 percent for U.S. issuers.

JPMorgan retained its top position with 5.8 percent, despite giving up some market share. BofA Securities and BNP Paribas rounded out the top three underwriters to the end of September.

Sustainable lending holding up well so far

Sustainable loan activity in the past two years is starting to look like mean-reversion, with four of the past seven quarters reverting to the $150bn mark, interspersed with spikes.

Q3 issuance was back down at $150bn, putting the first-nine-month tally at just over $500bn – just 3 percent lower than the same period in 2021.

During the period, the U.S. accounted for 43 percent of the sustainable lending market; Asia-Pacific borrowers took 15 percent; leaving Europe just 37 percent: its lowest ever share.

BofA Securities retained the top spot for sustainable syndicated loan mandated arrangers during the period, despite its market share slipping slightly to 4.7 percent. BNP Paribas and Mizuho Financial Group took second and third place, respectively.

Asia-Pacific keeps sustainable ECM on the road

Equity issuance by sustainable companies has been volatile so far in 2022.

After a large drop going into the second quarter, Q3 saw something of a bounce-back by number and value of deals, driven by a strong showing among Asia-Pacific issuers, to bring the first-nine-month tally to $19bn, down 35 percent year-on-year and a three-year low.

In fact, for the first nine months of 2022, Asia-Pacific has accounted for almost three-quarters of sustainable equity capital markets activity, accounting for five of the top 10 ECM offerings, led way-out in front by the $11bn IPO of South Korean battery producer, LG Energy Solution in January.

Goldman Sachs, Citi and Morgan Stanley topped the list of bookrunners for sustainable equity offerings, sharing more than a quarter of the market.

Meanwhile, M&A activity involving sustainable companies has also held up relatively well, given the wider market turmoil.

While the aggregate value of corporate acquisitions has fallen by a fifth year-on-year, to an aggregate value of $118bn and a two-year low, the number of transactions is up 15 percent compared to a year ago with 1,055 deals announced to the end of September 2022, representing an all-time high.

By number of deals, the U.S. and China each accounted for 16 percent of total sustainable deal making activity, followed by India and United Kingdom, which each accounted for 6 percent.

Watch: How have M&A trends changed? | The Chatter | The Big Conversation

Designed with the future of investment banking in mind, and in a rapidly changing and competitive market, Refinitiv Workspace delivers the content and functionality you need


Faqs

What is the outlook for sustainable finance bonds?

In the first nine months of 2022, sustainable finance bonds have returned to pre-pandemic levels, falling by 26 percent compared with the same period in 2021.