Global Issuance

Issuance by Location

In 2022, EMEA remained the largest issuing region of impact bonds, despite a 15% drop in issuance year on year. A total of US$405 billion of impact bonds were launched, comprising over half of global issuance. France and EMEA supranational agencies both issued less, partly due to diminishing popularity of the social bond market. Issuance in UK fell 72% compared to 2021 when the government ramped up issuance ahead of COP26.

APAC followed as the second largest issuing region, with US$241 billion or 31% of global issuance. APAC was the only region with issuance growth of 12% in 2022, driven by China and Japan.

The Americas issued US$92 billion of impact bonds in 2022, down 35% from the previous year due to lower issuance from the United States. Here, increased regulatory scrutiny may have played a role, with the SEC’s Climate and ESG Task Force focusing on greenwashing and releasing new proposals to help combat the issue. In Chile and Canada, impact bond issuance fell 68% and 22% respectively. Issuance from the Cayman Islands was 34% lower after Chinese real estate firms and REITs stopped issuing bonds in 2022 amid a property debt crisis in China. The fall was balanced by issuance from offshore firms in the Middle East.

EMEA’s impact bond market showed resilience despite a fall in issuance: the percentage of impact bonds issued versus general bonds grew from 1% in 2021 to 5% in 2022, reflecting the increased regional focus on climate change adaption and mitigation. By contrast, the relative amount of impact bonds issued dropped from 5% to 3% in APAC and was unchanged in the Americas.

While supranational entities have traditionally issued a much higher proportion of impact bonds versus general bonds, the relative amount of impact bonds issued fell from 41% in 2021 to 30% in 2022 as the pandemic-driven issuance of social bonds has reversed in 2022.

China issued 48% more impact bonds by dollar amount and surpassed France to become the largest single issuing country of impact bonds in 2022. The country launched a total of US$111 billion, representing 14% of global issuance. The proportion of impact bond verified by a third party increased from 71% in 2021 to 83% in 2022, though it still lags other major issuing countries such as France and Germany which had a certification rate of between 98% and 99%.

Germany surpassed France to become the second largest issuing country by dollar amount. It launched a total of US$84 billion in impact bonds, up 11% from the previous year. France issued US$80 billion of impact bonds in 2022, down 23% from 2021.

The US remained the fourth largest issuing country despite a 35% drop in issuance. However, the proportion of certified bonds jumped from 59% and 83% as regulators launched investigations in greenwashing while tightening scrutiny on disclosure for ESG funds.

Issuance by Bond Type

While the absolute amount of green bonds issued was 2% lower in 2022, it remained the most popular bond type among impact bonds. US$487 billion of green bonds were launched in 2022, representing 63% of all impact bonds issued, compared to just 55% in 2021. The proportion of green bonds certified by a third party rose from 88% in 2021 to 93% in 2022, with regulators around the world continuing to build and refine their green bond taxonomies.

Meanwhile, sustainability bonds - where proceeds will be exclusively applied to finance or re-finance a combination of green and social projects - and social bonds, both took a smaller share of the impact bond market. Their absolute issuance amount fell by 32% and 25% compared to the previous year.

China surpassed Germany to become the largest green bond issuer of 2022. It issued US$102 billion of green bonds, representing a 62% increase from 2021. The percentage of green bonds verified by a third party increased from 76% to 86% in dollar terms. Chinese regulators have been ramping up efforts to bring Chinese green bond standards on par with global expectations. In 2022, Chinese regulators published the green bond principles1 which require 100% of bond proceeds to be spent on eligible green projects. These principles also require third-party verifiers to conduct annual self-assessment and report to relevant authorities2.

Green bond issuance in Germany rose 14% to US$73 billion, to become the second largest issuer by dollar amount.

The Netherlands and supranational entities, which both launched around US$32 billion of impact bonds, were the third and fourth largest issuers of green bonds. The US was the fifth after issuing 39% less.

France issued US$42 billion of social bonds in 2022 and remains the largest single issuing country of social bonds despite a 27% fall in issuance. Supranational entities, which issued more social bonds than France in 2021, issued 62% less in 2022. Nonetheless, the largest impact bond issuance of 2022 was a €6.5-billion social bond issued by the European Union in December.

Meanwhile, social bonds are gaining momentum in East Asia, with Korea and Japan becoming the second and third largest issuing country of the bond type respectively. Issuance in Korea rose 32% to US$24 billion while Japan’s issuance rose 49% to US$14 billion.

Social bond issuance in Japan has been supported by regulatory action. The FSA published social bond guidelines3 in 2021 and finalized examples of indicators to demonstrate projects’ social benefits4 in 2022, boosting market confidence in the quality of the asset class. In Europe, however, regulatory development has not been as successful, with the social taxonomy shelved by the European Commission.

Supranational entities remain the major issuer of sustainability bonds, launching US$49 billion of these bonds in 2022. The number was 33% down year on year, with the market shifting focus to green bonds.

The US remained the largest single issuing country of sustainability bonds, launching US$14 billion of these bonds, a 26% fall in issuance.

It was followed by France, which raised issuance by 33% to US$13 billion. This was the only bond type that France issued more of in 2022.

In Asia, issuance from Japan remained almost static while that from Korea fell 43% year on year.

Issuance by Issuer Type

Governments and corporates launched US$391 billion and US$380 billion of impact bonds respectively in 2022. While governments have traditionally dominated the impact bond market in dollar terms, the gap of issuance amount with corporates has narrowed over the past two years.

Issuance of corporate bonds decreased across all regions in 2022, with Americas seeing the biggest fall. Issuance in the Americas fell 35% while APAC and EMEA slid 4% and 2% respectively.

Governments from the Americas and EMEA issued 36% and 26% less compared to the previous year, while governments from APAC raised impact bond issuance by 25%.

Regarding the number of securities issued, corporates have historically issued more impact bonds than governments, due to the larger average size of government/agency impact bonds versus corporate bonds.

The financial sector has caught up with the quasi-government sector to become the two largest issuing sectors of impact bonds, issuing about US$250 billion in 2022. The financial sector launched 17% more impact bonds last year than 2021, driven by high issuances from financial institutions in APAC.

The quasi-government sector issued 16% less in impact bonds largely due to supranational agencies issuing fewer social bonds in 2022, bringing the issuance level of the two sectors on par in dollar terms.

The utility sector remained the third largest issuing sector, launching US$89 billion of impact bonds in total. While utility firms in the Americas and APAC issued 31% and 13% less respectively, issuance from EMEA companies rose 28% over the year. By contrast, issuance from the energy sector remained low at US$2 billion globally, with those in EMEA slashing issuance by 71%.

In 2022, corporates have launched fewer impact bonds across all types, with issuance of green bonds, social bonds and sustainability bonds dropping 4%, 12% and 32% respectively.

Government agencies launched 3% more green bonds, but 37% and 19% less for social bonds and sustainability bonds respectively. This shows a shift of focus among global governments from social bonds to green bonds as sovereigns continue to work on their net zero goals.

US Municipal Issuance

US municipalities have launched US$42 billion of impact bonds in 2022, including both new and refunding issuances. This represented a 9% drop in dollar terms, compared to a 35% decrease in the US across all types of issuers.

In terms of the number of securities issued, US municipalities issued 1,412 fewer impact bonds than the previous year.

Nonetheless, issuance amount grew almost 7 times over the past five years, from US$6 billion in 2018.

New York has replaced California as the top issuing state of impact bonds. Issuance from New York rose 11% to US$8.1 billion while California saw issuance fall 38% to US$8.0 billion.

Massachusetts was the third largest issuing state in 2022. Issuance jumped 83% to US$4.5 billion over the year.

Single-family housing has replaced multi-family housing as the top use of proceeds among municipal impact bonds in 2022. Proceeds from US$9.7 billion of impact bonds will support single family-housing projects, rising 45% from the previous year. Meanwhile, impact bonds relating to multi-family housing projects fell by 44%.

Mass or rapid transport was the third largest use of proceeds, with US$4.5 billion of bonds funding these projects in 2022. It was followed by general purpose and public importance, funded by US$4.4 billion of impact bonds.

The total return index value of the ICE Green, Social & Sustainable Bond Index (SSAG) has dropped 17% since the beginning of 2022, which is in line with the ICE BofA Euro Broad Market Index (EMU0) which also fell 17% over the past 12 months. This shows comparable performance between impact and non-impact bonds.

Regarding individual impact bond types, the total return index value of the Sustainable Bond Index (SSTN) fell 14% over the course of the year, overperforming EMU0 by 3% year-to-date. Conversely, ICE BofA Green Bond Index (GREN) and ICE Social Bond Index (SOCI) both fell 18%, underperforming EMU0 by around 1 % year to date. The difference in performances may be attributed to the different sectors and effective duration of the index constituents. SSTN, which allocated 3% to sovereigns which have longer duration, had 0.7 years lower duration risk than EMU0, outperforming the broad market index amid the rising interest backdrop. Conversely, GREN allocated 7% to sovereigns and had 0.6 years higher duration risk than the broad market index.

All impact bond indices also improved their relative performance to the broad market in Q4, as all of them had a higher allocation to the credit sectors than EMU0. The credit sectors, in particular corporates, outperformed duration-matched government bonds during the quarter.

Regarding Germany’s sovereign green bond issuances, the level of greenium differed depending on the maturity of securities.

The yield spread between a Germany 5-Year Green Federal note and its non-green counterpart shrunk over the first three quarters of the year as yield climbed. However, it started rising sharply in Q4 2022, reaching an all-time high of -14 bps towards the end of the year.

The changes in yield spread moved in an opposite direction between Germany’s 10-year green federal bond and its conventional twin. Yield spread has been narrowing throughout the year causing that greenium to disappear for a period of time in the second half of the year.

As for Germany’s 30-year green federal bond pair, greenium has been shrinking over the year but was still observable at around -0.5 bps by the end of year.