Sustainable Bonds: ticking the transition box

Sustainable Bond issuance (including Sustainable-Linked Bonds and Municipal Bonds) bounced back strongly in the first half of the year, with a particularly strong Q1 (recorded quarter) followed by a solid Q2.

With issuance in the first half of 2024 already exceeding 50% of full year 2023, the stage is set for a potential resumption of the overall growth trend in Sustainable Bond issuance after the interruption of the past couple of years.

While Green bonds remain the dominant category, there are other interesting trends developing, including strong Transition Bond issuance growth in H1, taking this category's share of Sustainable Bond issuance to 3.47%. Although Transition Bonds still only represent a small proportion of the Sustainable Bond market, this recent surge of issuance activity appears consistent with the general expansion of the Transition investing theme we've noted since the beginning of the year.

Given investor focus on Transition investing, we have examined the Use of Proceeds for the Sustainable Bonds issued in H1 in more detail. As might be expected, Transition Bonds have a high concentration on Climate orientated projects, representing 67% of the issue amount. Use of Proceeds analysis across all categories of Sustainable Bonds issued in H1 reveals a similar significant skew towards Climate projects (see Figure 1).