Green Finance, Member Exclusive

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.

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Green Finance Briefing: Green bonds exceeded fossil fuel financing for the first time in 2022

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.

Our top stories

The ESG mirage: More about the hype than values

ESG is growing increasingly popular, but the unregulated world of sustainable investments is not always what it's cracked up to be.

Moreover, the Russia-Ukraine conflict has also surfaced some uncomfortable truths about the current ESG landscape, as Russian state-owned assets were found in ESG funds.

“Look under the hood”: The difference between ESG and sustainable investing 

As ESG investing grows in popularity, it is also flooded with bad actors, leaving investors growing wary of greenwashing and overwhelmed by the flurry of options.

At the Banking on the Planet conference, investors shared how they think about ESG and outlined the differences between ESG and sustainable investing.

Report of the week

The relationship between biodiversity and financial stability

Financial institutions are vulnerable to biodiversity-related risks through the physical and transition risks of companies they finance, according to The Post-2020 Global Biodiversity Framework and What it Means for Business Report.

The report is highly relevant for financial institutions (FIs), as there are growing expectations from regulators, investors and other stakeholders for FIs to assess, report and reduce the biodiversity-related risks and impacts of their lending and investment portfolios.

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

What you need to know

Five reasons to feel more optimistic about climate progress

The news can be bleak, but 2022 actually saw a lot of movement on climate action.

Where is corporate climate action headed in 2023? 8 experts share their insights

Eight leaders’ perspectives on the trends that will define the year ahead so all of us can take more effective action to rebalance the planet.

Five charts that capture the state of global energy in 2022

The past year saw unprecedented energy shocks with Russia’s invasion of Ukraine, even as the world got closer to peak fossil fuel consumption. 

Four key questions to ask about climate investment in 2023

Silicon and lithium prices, venture capital’s appetite for funding climate tech and other factors will set the pace of the clean energy transition this year. 

Hong Kong raises $5.8 billion in green bond offering

The Government of Hong Kong raised $5.75 billion in a triple-currency offering, with bonds denominated in US dollars, Euros and Renminbi (RMB). According to the Hong Kong Monetary Authority, the offering marks the largest ESG bond issuance in Asia to date.

Robust inflows obscure a difficult year for ESG funds

Multiple headwinds have taken some of the shine off investing sustainably, but demand is still growing.

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