Will The Energy Transition Re-Kickstart The ESG Bond Market?

2021 saw record new issuance across the ESG Fixed Income market. In contrast, 1Q22 saw a change in that trend. New issuance recorded it's first quarter-on-quarter drop, down approximately 80% versus 4Q21 and 15% versus the 1Q21. But that may be about to change, especially in Europe.

The EU is now faced with a dichotomy: On the one hand, there is a refocus on Energy Security following the Russia's use of Gas and Oil supply as a bargaining chip to reduce the EU's involvement in Ukraine. And at the same time,  to meet EU demand for energy, several countries are u-turning on the reduction or resistance to coal-powered plants or nuclear power. The Netherlands and Poland are but two examples.

The political narrative points to the immediate imperative. A bitter pill to swallow for many that can only be digested with the promise of a longer term, greener alternative.

Despite the recent dip in ESG Bond issuance, asset managers are expecting a new impetus for Green Financing in 2022. Which for investors creates new opportunities to accelerate their net-zero portfolio ambitions.