Global issuance of sustainable bonds – including green bonds, social bonds and sustainability bonds – hit a record $127.3 billion in the third quarter of 2020, according to a new report by Investment information service and rating company Moody’s Investor Services. Q3’s figure represents a 30% in issuance of sustainable bonds over the prior quarter, driven by sequential strength in all 3 categories of bonds.

Given the record strength in the quarter, Moody’s has raised its forecast for 2020 sustainable bond issuance, now estimating it could approach $425 billion, ahead of the prior forecast of $325-$375 billion, and substantially ahead of the estimate exiting Q1 of $325 billion. By category, the forecast calls for issuance of around $250 billion of green bonds, $100 billion of social bonds and $75 billion of sustainability bonds.

Following years of growth, sustainable bond issuance faltered in Q1 2020, as the COVID-19 pandemic began to affect capital markets. Green bond issuance, the largest sustainable bond category, was particularly hard hit, with Moody’s lowering its forecast after Q1 from $300 billion to $175-$225 billion.

Volumes began to rebound substantially in Q2, however, driven in particular by significant growth in social and sustainability bonds, as issuers began raising funds to respond to the COVID-19 pandemic and to finance recovery efforts. The strength continued in Q3, with green bonds rebounding to their second best quarterly performance of $73.3 billion, and both social and sustainability bonds hitting record levels of $28.1 billion and $26.9 billion, respectively.

Matthew Kuchtyak, AVP-Analyst in Moody’s Investors Service’s ESG Group, said:

“Global sustainable finance volumes will approach $425 billion in 2020 after a strong third quarter. We now forecast around $250 billion of green bonds, $100 billion of social bonds and $75 billion of sustainability bonds for the full year.”

Other highlights from the report include:

  • Sovereign sustainable bond issuance continues to grow, reaching over $33 billion year-to-date, from $22 billion in all of 2019.
  • Sustainability-linked debt remains an emerging area with strong growth potential, totaling $20.8 billion in the third quarter.
  • Sustainable bond issuance represented a 6.1% share of global debt issuance, a new quarterly record.
  • Green loans totaled just $1.2 billion in the third quarter, falling after the record $12.6 billion during the second quarter.