The EU Green Bond Standard will be a key driver of impact bond issuance trends in 2024, according to David McNeil, Head of Responsible Investment Research at Insight Investment.
The research report also says that Insight is forecasting that impact bond issuance is set to increase in 2024 from 2023 levels to between USD820-900bn as issuers benefit from more favourable financing costs than the past two years.
In 2023, key innovation within the impact bond market included integration of biodiversity within green bond frameworks, the introduction of the Practitioners Guide for Bonds to Finance the Sustainable Blue Economy and a new generation of debt-for-nature swaps. Whilst nature-related projects represent a small share of use of proceeds, Insight expects this to grow in 2024 as a result of rising investor demand. For financial institutions and banks, Insight also expects increasing use of sustainability-linked loans to finance transition activities, following prominent examples by Nordea and Bank of China.
Insight says that another important driver of issuance trends will be the EU Green Bond Standard, which can be applied by issuers from Q4 2024. This should lead to issuers focusing on assessing if their green activities are aligned to the EU taxonomy and therefore eligible to be labelled under the EU GBS, this will be helped by CSRD EU taxonomy reporting requirements.
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