Global and European trends in the sustainable bond markets

Abstract

The implementation of climate policy requires the mobilisation of a huge amount of capital to realise the investments envisaged in accordance with the Paris Agreement. Financing these investments requires both public funds at the supranational level, state governments, local and regional governments as well as private funds, from individual investors. It is essential to allocate capital in sustainable investments that will show positive effects of a long-term nature. These requirements are met by bond issuance and its wide range of types. The aim of this paper is to present the differences in the development of the bond markets for financing sustainable development from a global perspective, including the European and Polish markets. Analysis of differences in the types of bonds issued and their volume, the activity of issuers, regulatory conditions, challenges and good practices and recommendations are indicated. The methodology of the study refers to a review of legal regulations, subject reports, and Climate Bonds Initiative`s empirical data. The research results indicate that, by 31 December 2023, climate bonds had recorded aligned GSS+ instruments (green, social, and sustainability bonds + SLBs) with cumulative volume of USD4.4tn. Europe was the largest source of aligned GSS+ debt instruments, with USD405bn representing 46% of the 2023 total. Among green bond issuers, the leaders in the global economy are financial enterprises (57% of issues) and non-financial enterprises (29%). Energy, buildings, and transport remained the three largest use of proceeds categories, collectively contributing 75% of the green debt volume. In terms of currencies for the issuance of green instruments, the main currencies were EUR and USD (63% of issues).