A record-breaking first quarter has put the sustainable bond market on track to top US$1 trillion in issuance for the first time. According to a quarterly report from the Climate Bonds Initiative (CBI), US$272.7 billion of aligned green, social, sustainability, sustainability-linked and transition (GSS+) bond volume was added in Q1 2024. That total was 15% higher than Q1 2023’s US$237.2 billion, and 41% above Q4 2023’s US$193 billion, also beating the previous busiest quarter – Q1 2021, which saw deal volume worth US$272 billion. CBI attributed the high levels of activity partly to expectations of a rate cut by the US Federal Reserve, which it said encouraged investors to lock in prevailing yields, resulting in strong appetite for increased supply. Green bonds made the largest contribution (72%) to the Q1 2024 total, also reaching a new record with volume of US$195.9 billion. A further milestone was reached with total green bond volume crossing US$3 trillion since market inception in 2006, also contributing to cumulative volume of US$4.7 trillion in GSS+ bonds. In the sovereign GSS+ market, US$32.2 billion of new bonds were issued by 11 issuers, while 16 others tapped existing bonds contributing US$20 billion. The largest deal was Japan’s US$10.6 billion issuance to fund its clean energy transition programme. This activity helped the aligned sovereign GSS+ market pass the US$0.5 trillion milestone, reaching US$538.3 billion. “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,” said Caroline Harrison, Director of Technical Development at the CBI. “The leading role that sovereign issuers are taking in this space suggests the urgency of the transition is being endorsed from the top down.” ‘Aligned’ bonds refers to those meeting the requirements outlined in the CBI’s screening methodology.
