Entries for 'Sustainable Finance'

The ESG debt universe (bonds and loans) hit a fresh record high of $5.4 trillion in H1 2023, up 30% from H1 2022. However new ESG debt issuance slowed to some $630 billion in H1 2023—over 15% lower than in H1 2022.

With global policymakers focused on mobilizing private capital for climate finance—particularly in emerging markets—multilateral development banks (MDBs) and development finance institutions (DFIs) are devoting more resources and capacity to catalytic capital and blended finance. Greater private sector participation could be incentivized through improved capital treatment of blended finance instruments and policy measures to help to enhance market liquidity.

Global clean energy investment continues to outpace spending on fossil fuels, largely driven by China and mature markets. While the subdued global economic outlook is weighing on commodity prices—including energy transition metals and minerals the growing push to shift to solar and wind energy should boost demand for aluminum, copper, and rare-earth minerals on the path to net-zero economy.

While worldwide efforts are being made to shift to renewables and alternative fuels, fossil fuels are still projected to be a major source of energy by the end of the century, accounting for nearly 25% of global supply; Given this continued reliance on fossil fuels, carbon capture and storage (CCS) technologies have a vital role to play in addressing climate change—but are currently projected to fall short of their potential on the path to net-zero.

The strong momentum in climate pledges and climate investment flows in recent years is encouraging… but many publicly listed firms still have business practices that are not aligned with keeping global warming < 2°C.

High and rising global debt levels have created a slow-burning crisis, with countries increasingly vulnerable to future shocks after the unprecedented surge in government debt resulting from the Covid-19 pandemic.

Early and up-front capital spending is crucial for managing the long-term costs of the energy transition; Achieving net zero emissions will require extensive investments in new and innovative technologies, with nearly half of emission reductions expected to come from technologies currently under development.

Amid tighter monetary and financial market conditions, ESG fund flows remain subdued and volatile. After large outflows in March, April saw a slight recovery in investor appetite for ESG funds. However, outflows from emerging market ESG funds accelerated in April.

The ESG debt universe hit $5.1 trillion in Q1 2023, up from $3.8 trillion a year ago and $2.3 trillion in Q1 2021. Amid the recent banking sector turmoil, ESG loan issuance fell sharply in Q1 2023, coming in at $40 billion—over 65% lower than in Q4 2022. In contrast, ESG bond issuance reached its highest level in five quarters.

The voluntary carbon markets continue to gain momentum despite financial market volatility in recent months. The proliferation of net zero targets by large corporates remains the major driver of market expansion.

At our IIF Sustainable Finance and Global Debt & Financial Stability Roundtables last week, key themes included net zero transition finance as well as the impact of higher funding costs for vulnerable sovereign and corporate borrowers.

The IIF Sustainable Finance Monitor for Q1 discusses key trends shaping the global sustainable finance agenda (including climate competitiveness and scenario analysis), regulatory, policy, and research developments, and shares updates on the IIF's sustainable finance activities.

Despite the urgency of fighting climate change, the exploration and development of new energy technologies to replace fossil fuels could take many generations. Strong policy support to incentivize front-loaded investment could significantly shorten the time that it takes to develop new green technologies—improving nuclear energy provision, green hydrogen, carbon capture and storage, biomass etc.

Just Energy Partnerships—launched at COP26 to help emerging economies shift to clean energy—aim to mobilize international public and private capital to accelerate electrification in emerging and developing economies. Most existing JETP funding commitments are from traditional development finance institutions, including multilateral development banks (MDBs). However, a key goal of JETPs is to leverage public funding to catalyze private capital.

ESG fund flows have picked up, amid easier financial conditions and growing demand. Global climate flows surpassed $1.1 billion in 2022 - up over 25% from $870 billion in 2021. On average, ESG stocks and bonds are up by some 5% in 2023 ytd. Global sustainable/ESG debt issuance was down over 15% to $1.3 trillion in 2022, from $1.5 trillion in 2021. We project global ESG debt issuance to climb to $1.7 trillion in 2023 and near $2 trillion in 2024.

Progress by the Integrity Council for the Voluntary Carbon Market (IC-VCM) and the release of the Core Carbon Principles (CCPs) will help address ongoing concerns about voluntary carbon credit quality—a must to support market expansion; Greater price transparency will also help: in this first edition of our new Voluntary Carbon Markets Monitor, we introduce a registry transparency index to assess disclosure of the registries that track and validate the quality of carbon credit projects.

The ESG debt universe is fast approaching the $5 trillion mark, up from $3.4 trillion in 2021. While rising global rates weighed on total issuance in 2022, issuance in emerging markets remained strong, reaching an all-time high of $260 billion—mostly driven by China.