The first quarter of 2024 was the most prolific on record for sustainable finance volumes, according to the Climate Bonds Initiative (Climate Bonds) latest Quarterly Market Report.

USD272.7bn of aligned green, social, sustainability, sustainability-linked and transition (GSS+) bond volume was added in the first quarter (Q1) of 2024, 15% more than the USD237.2bn recorded in Q1 2023, and 41% more than the USD193bn from Q4 2023.

Green bonds made the largest contribution and hit a new quarterly record, with USD195.9bn amassed in the opening months of the year. Lifetime green bond volume crossed the USD3tn mark since market inception in 2006, contributing to cumulative volume of USD4.7tn GSS+ bonds.

Global GSS+ growth

All regions apart from Asia-Pacific exhibited growth year-on-year (YOY). Europe maintained its position as the largest regional source of aligned GSS+ volume, with USD149.5bn or 55% of the total priced in Q1. North America rebounded with a 68% increase YOY driven by an increase in deals from the green theme.

Africa’s presence spiked by 1692% YOY to USD4.9bn, with nine deals from seven issuers led by the African Development Bank (AfDB) (three deals with combined volume of USD3.1bn) and the Ivory Coast (USD1.1bn).

Milestone: Sovereign issuance surpasses half a trillion

During Q1 2024, lifetime aligned sovereign GSS+ volume crossed the USD0.5tn mark, reaching USD538.3bn, and sustainable finance passed a milestone of 50 sovereign issuers, landing at 53. Of that total, 22 sovereign issuers contributed USD52.5bn in aligned volume in Q1 2024, 37% more than the USD38.4bn priced in the same period of 2023, and 24% over the USD42.4bn captured in Q4 2023.

New aligned deals with combined volume of USD32.2bn came from 11 issuers, while 16 issuers tapped existing bonds contributing USD20bn. Japan (USD10.6bn) and Romania (USD2.2bn) priced debut green bonds, while Ivory Coast (USD1.1bn) joined the GSS+ market with a sustainability deal.

France is the largest single issuer of green bonds, having amassed green liabilities of EUR70bn (USD78.6bn) by the end of Q1 2024.  The government is committed to support a green transformation, evaluating all its expenditures against the six environmental objectives of the EU Taxonomy. More than 18% of its debt bears the green label.

In January 2024, France added a fourth point to its green yield curve with a EUR8bn (USD8.7bn) 2049 deal. The syndicated deal was originally destined to be EUR5bn, but was increased when the order book reached EUR98bn, covering the final deal size more than 12 times. The bond achieved spread compression of 2bp and obtained a greenium.

Overall, sovereign issuance made up 18% of issuance volumes in Q1 2024. The largest issuer type was non- financial corporates with 28% of the volume or USD76.7bn; this was dominated by the green theme (USD71bn).

The Last Word: The First Annual Trillion for Green Bonds?

After a record start to 2024, there’s strong indication this will be a record year for green bonds and sustainable debt markets on the whole. But could we see the first of the annual trillion in green bonds arrive this year? The author of our Quarterly Market Reports thinks so.

Caroline Harrison, Director of Technical Development, Climate Bonds:  ‘Sustainable finance has been quick off the blocks in 2024 and we could see a record year nearing $1trillion of green bonds alone. The sustained growth in this market reflects the enthusiasm of issuers to decarbonise their operations as swiftly as possible and seize the opportunities for growth. The leading role that sovereign issuers are taking in this space suggests that the urgency of the transition is being endorsed from the top down.’

Stay tuned for more market updates and don’t forget to read the full report here.

Source: Climate Bonds