NN Investment Partners says it expects the green, social and sustainability bond market to grow to a total of EUR 1.1 trillion in 2022.

The firm says the increase will be due to the urgency to finance the energy transition and look for fossil alternatives and is supported by recently introduced regulations, such as the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy.

NNIP says they expect more market growth due to increasing issuances, based on two trends. First, the energy transition will result in an acceleration of issuances with sovereigns and corporates looking for alternatives to fossil fuels and exploring other low carbon transport opportunities. Second, some segments such as sterling investors lag behind which indicates there is still more room for growth. US dollar denominated issuances rose in the last quarter of 2021, enabling issuers in the United States – and on a more global scale – to allocate in green bonds. Based on these two trends, NNIP expects that growth in the market will persist with a predicted EUR 1.1 trillion worth of issuances in 2022.

Douglas Farquhar, Client Portfolio Manager Green Bonds, at NN Investment Partners comments: “Since mid-2021 the green bond market has grown exponentially as it has gained support of investors to allocate in solutions that can create a positive environmental impact. Short duration and corporate green bond funds remain popular due to the potential to obtain high yield, performance and a positive environmental impact. The rapid growth in our green bonds strategies underlines that green bonds are being recognized for the pivotal role they play in the energy transition, contributing to meeting net zero goals and addressing climate change.”