Global exchange and clearing house operator Intercontinental Exchange (ICE) announced today the release of a new report examining the market for impact bonds. According to ICE, issuance of green, social and sustainable bonds continued to expand rapidly last year, increasing 77% over 2020 to reach nearly $1.04 trillion.
The new report examined several aspects of the sustainable bond market, including by issuer type, geography and bond category.
By bond type, green bonds continued to dominate the market, with issuance more than doubling year-over-year to reach $583 billion, up 138%. Sustainable bonds grew 28% to reach $228 billion, and social bond growth was 39% following an explosive year in 2020, reaching $225 billion.
Impact bond issuance grew across nearly all issuer types, including corporates, governments, investment vehicles and private entities. Corporate impact bond issuance remained the largest category, more than doubling to over $450 billion, and outpacing the growth in government issuers, in second spot at $372 billion. Among corporate issuers, financial sector issuers took the top spot with nearly $200 billion issued, followed by the utilities and real estate sectors. Government issuers dominated the social bond category, issuing $123 billion of social bonds in the year. Government and supranational issuers were among the largest individual issuers, with the European Union’s €12 billion issuance in October marking the largest of the year, and the UK issuing two green gilts totaling £16 billion.
By region, EMEA saw the greatest issuance volume at $474 billion, up 84%, while APAC was the fastest growing, up 179% to reach $253 billion. France, China and Germany were the top issuing countries, at $129 billion, $87 billion and $82 billion respectively, followed by the U.S. at approximately $80 billion.
One of the most interesting phenomena discussed in the report is the presence and growth of favorable pricing for green bond issues, or a “greenium” over similar issues lacking green credentials. To examine this effect, the report recorded the difference in yields over the year of German sovereign green bonds relative to their non-green twins. Germany issued its first green bond in 2020, using a “twin bond” model by issuing the securities alongside existing conventional securities with matching characteristics, including maturity and coupon. According to the ICE report, the premium spread of the green bond issue over its counterpart bond widened over the year.
Click here to see the ICE report.