NN Investment Partners sees the green, social and sustainability bond market growing €1.1 tn in 2022 to reach €2.9 tn.

NNIP says the green, social and sustainability bond market grew to over €1.8tn this year and  this growth is likely to continue in the year ahead. Growth will come largely from EU issuance although the US and emerging markets will also start to gain market share in green bonds.

The global green bond market grew €440 bn to €1.1 tn year-to-date as of November 2021. Social bonds also experienced strong growth, growing €189 bn to €370 bn, while sustainability bonds more than doubled, with an increase of €162 bn to €303 bn.

One of the key factors supporting issuance in 2021 was the EU beginning its green bond issuance to support the NextGenerationEU recovery program. The strongest factor in green bond markets in 2022 is likely to be EU issuance again. The EU has pledged to issue up to €250 bn in green bonds to support the bloc’s pandemic recovery fund. EU Green bond issuance is likely to grow next year by €50-75 bn from 2021 levels, but the total could well exceed this figure depending on the speed of EU issuance.

Bram Bos, Lead Portfolio Manager, Green Bonds, at NN Investment Partners: “It is clear to us that the momentum of growth in GSS bonds will only accelerate further in the years ahead. This growth is both driven by demand from investors as well as from regulators and policy makers who are aiming to reach goals to lower carbon footprints. NN IP has been a frontrunner in the green bond market, offering four dedicated green bond funds.”

Bos continues: “We believe growth in 2022 will be driven by a few factors. First of all, increased implementation of regulation related to sustainable finance is a factor, which will contribute positively to GSS growth. Secondly, the EU’s green bond program which kicked off in October 2021 will be influential, as we expect issuance to be between EUR 50-EUR 75 bn from the EU. Lastly, sustainable finance is spreading to more parts of the world. In the past Europe has been the centre of the GSS market, but we expect the US and emerging markets to gain market share in 2022.”