Europe set to drive green bond issuance in 2022

The green bond market has hit EUR 1tn of outstanding green bonds in September 2021. Social and sustainability bonds are also to grow to EUR 200bn each.

Investor Relations Specialist

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Green bond new issuance growth rate of 25% to EUR 500bn in 2022 compared to 2021, with Europe leading the way. The green bond market has hit EUR 1tn of outstanding green bonds in September 2021. Social and sustainability bonds are also to grow to EUR 200bn each, but standards needed to support future growth.

Peter Goves, European Interest Rate Strategist at MFS Investment Management

EU’s first green bond In another display of staggeringly high demand, the EU successfully launched its first ever green bond today with a maturity of 15yr. This is just the beginning of the large wave of EU green bond supply that will come to market in the years ahead

Demand clearly remains strong given the size of the order book. Many interconnected factors are at work here, not least the EU’s high credit quality, primary market liquidity and bond size together with such bonds fitting into ESG considerations. The transparency of the EU as an issuer is also to the benefit of the credit as it deepens its strategi presence within the European fixed income market.

Douglas Farquhar, Client Portfolio Manager Green Bond, NN Investment Partners

Green bond new issuance growth is set to accelerate by 25% to EUR 500bn in 2022 compared to 2021, with Europe leading the way, according to new forecasts from NN Investment Partners (NN IP). NN IP expects vast momentum in Europe, with the EU issuing EUR 250bn over the next 5 ½ years to support the Next Generation EU fiscal plan.

The introduction of the EU Taxonomy, which defines clear green criteria for a number of sectors, should also encourage issuance. Finally, there is still some catch-up on issuance from 2020. Social and sustainability bonds are set to hit EUR 200bn each in 2022, but growth in these areas will be constrained by a lack of standard definitions.

Outlook for 2022 
In September, the green bond market passed a significant milestone of EUR 1tn of outstanding green bonds. Social and sustainability bond have also seen growth. The chart below shows the development of the green, social and sustainability bond issuance over the last eight years, and NN IP’s prediction for 2022.

In particular, the EU is expected to take centre stage on issuance with an estimated EUR 50bn-EUR 100bn in green bonds coming to market in 2022 to support European countries hit hard by the COVID-19 crisis. We are also expecting a strong acceleration of sectors that have previously lagged in green bond issuance, including metal and mining companies, oil and energy companies and chemical companies. 

With the increased interest from investors in ESG-led investment, we would ultimately expect the US also to start playing a more dominant role in the sustainable fixed income market. While we have not seen any signs at this stage that the US Treasury is planning to issue green or other labelled bonds, it may look to emulate European success in the longer term.

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Europe set to drive green bond issuance in 2022