ESG Bond issuance in 2022 has been much lower than the record breaking 2021. Investors are hoping for new impetus for ESG Bonds from the Energy Transition.
Issuance Is Down
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.
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