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The growth of sustainable bonds takes on uncertainty

The sector is showing resilience despite a challenging market backdrop
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The sustainable bonds sector, which includes securities classified as Green, Social, Sustainability, Sustainability-linked according to the market standards1, has experienced persistent growth in recent years thanks to strong investor demand and has proved to be generally resilient in terms of issued volumes, despite a challenging market backdrop.

Globally, sustainable bonds worth more than USD 550Bn have been placed in the first 10 months of this year. European issuers account for more than half of all issued bonds to the tune of USD 300Bn, including USD 190Bn of Green bonds. Volumes are down compared to the record levels of 2021 since the difficult environment, marked by rising interest rates and a deterioration in the geopolitical and macroeconomic scenario, has prompted companies, governments and supranational institutions to postpone a number of placements.

SOURCE Intesa Sanpaolo’s elaboration on Bloomberg data and ICMA classification as of 31.10.2022

In our view, the outlook for sustainability bond issuance in Europe remains favourable since we continue to believe in the soundness of the key drivers behind the exponential growth recorded in recent years. We expect a pick-up in bond issuance as we anticipate market conditions to improve.

The strong demand from investors, who are paying increasingly attention to environmental, social and governance (ESG) issues in their investment choices, is at the core of this trend. The global industry of sustainable funds, which incorporate ESG criteria in their investment processes, reached USD 2.2Tn in September, according to data collected by Morningstar2. The sector continued to attract funds even in 2022, showing greater resilience than traditional funds.


Europe is the largest market for sustainable investments, i.e., those incorporating selection criteria related to environmental, social and governance factors, with almost 80% share of total assets globally, according to data collected by Morningstar. Sustainable funds account for around 20% of European fund assets and this percentage is set to rise in the coming years.

Global flows into sustainable funds totalled USD 140Bn in the first 9 months of 2022. Particularly in the second and third quarter, ESG products showed greater resilience than traditional ones, recording new subscriptions to the tune of USD 56Bn against net outflows of USD 480Bn for the global fund universe. In particular, this divergent trend was observed for European sustainable fixed-income funds, which raised USD 29Bn, while conventional funds posted redemptions of about USD 140Bn.

This gap in net flows can be explained by the tendency of investors in ESG funds to generally maintain a long-term view and to be less influenced in their decision-making process by frequently varying market conditions.

The regulatory component provides a further explanation for the difference in investing patterns: MiFID II requires to take into account clients’ preferences as they relate to their willingness to invest into ESG-focused businesses or into enterprises that focus on the development of human capital or disadvantaged communities. This will help direct investor choices towards sustainable investment products.


In the first 10 months of 2022, close to USD 320Bn of ESG-labelled corporate bonds were issued globally, the proceeds of which are intended to finance projects to achieve environment, social and governance sustainability goals. This compares to USD 400Bn raised in the same period in 2021. European issuers sold in the market USD 170Bn's worth of securities3.

The share of ESG-labelled bond issues continued to increase in percentage terms, despite the current market volatility and the sharp decline in total issues. The lower issuance volumes of ESG bonds are therefore not linked to an unwillingness to issue sustainable securities, but rather to a more widespread slowdown in the market. The euro remains the preferred denomination currency with a 50% share of the total, globally.

Sustainability-linked bonds (SLB) according to ICMA criteria, continue to benefit from growing success among issuing companies, especially European ones. Indeed, this product allows issuers to demonstrate their commitment to achieving ESG objectives, while maintaining greater flexibility in terms of use of proceeds.

For this reason, the share of SLB bonds of total of European issues continued to grow. Year-to-date volumes for this category are close to USD 40Bn, in line with those recorded in the same period of 2021, while Sustainable and Green bonds recorded a drop in volumes compared to last year.


Governments and supranational institutions will continue to be important growth drivers for the Green bond market in the Euro area. The European Union has issued four Green bonds worth of approximately EUR 35Bn and in the coming years it is set to become one of the largest issuers in the world. The governments of the member countries have increased the supply of Green bonds, which represented almost 20% of the total bonds issued for the year. Only Social bonds suffered a setback following the lack of funding requirements linked to the pandemic3.

The supply of ESG bonds will continue to be sustained through capital markets, which are a critical mechanism for companies and institutions to finance the various investments aimed at achieving their sustainability goals.

1 International Capital Market Association (ICMA) standards are among the most widely used by market participants

2 “Global Sustainable Fund Flows: Q3 2022 in Review”, Morningstar

Intesa Sanpaolo’s elaboration on Bloomberg data and ICMA classification as of 31.10.2022

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