Green Finance Briefing: Green bonds exceeded fossil fuel financing for the first time in 2022
- Green debt surpassed oil, gas and coal financing last year, but this doesn’t mean that the fossil fuel industry is coming short of funds.
- We also look at the relationship between biodiversity and financial stability, and a divided America on ESG.
Data Snack: Green bonds exceeded fossil fuel financing for the first time in 2022
The green bond market is growing increasingly appealing for lenders.
Last year, green debt issuance topped fossil fuel financing for the first time, according to Bloomberg. Green projects received around $580 billion in financing, whereas oil, gas and coal industries got $530 billion in bond issuance.
This reversal was also driven by the fact that green bonds and loans have been generating more fee revenue for bankers – $3.3 billion in 2022, 32% more than the $2.5 billion earned from fossil fuel ventures.
Top green bond issuers included Credit Agricole, BNP Paribas and Bank of America, whereas the fossil fuel financiers were RBC Capital Markets, Wells Fargo and JP Morgan Chase, Bloomberg data showed.
However, this doesn't mean that the fossil fuel industry is coming short of funds. Considering the high oil prices driven by the global energy crisis, fossil fuel companies have enjoyed a rally in revenues, making them less dependent on debt.
Nevertheless, the green bond market is still set to grow further in 2023. Demand is expected to rise especially in areas like Europe, where there is high appetite for green projects that could be financed via green bonds, according to JP Morgan.
Morgan Stanley also forecasted a 10% increase in green bond supply to around $600 billion in 2023, as the pace of rate hikes globally slows and/or peaks.
"We anticipate renewed participation in the labeled bond market from HY investors, who were largely absent given the increased volatility and higher rates, but are likely to have refinancing needs next year and may take advantage of the green or Sustainability-Linked Bond market to do so where possible," Morgan Stanley analyst Stephen Byrd said in a note.
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Report of the week
The relationship between biodiversity and financial stability
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Just look at the charts
The green premium between green and traditional bonds continues to widen
Source: JP Morgan
America divided on ESG
Republicans are coordinating attacks on ESG as Democratic states want to incorporate it
Source: Bloomberg
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