Redemptions, taxonomies to help sustainable bond market to fresh highs, says SocGen
The acceleration of sustainable bond maturities and ongoing proliferation of 'green' taxonomies globally could be major drivers for sustainable bond issuance to reach $7 trillion, according to Societe Generale.
Originally published in Environmental Finance.
The comments follow the sustainable bond market crossing the $6 trillion cumulative issuance milestone earlier this month.
Societe Generale sustainable bonds head Stéphane Marciel told Environmental Finance that the pace of redemptions of existing sustainable bonds is "increasing significantly over the coming years" which could be an "interesting driver" of the market towards the next trillion dollars.
"That is good news [for the sustainable bond market], provided that for use-of-proceeds bonds – and this is very important – eligible projects and assets are there as well," he said. "Because refinancing with new sustainable bonds older projects that had already been funded by sustainable bonds is not best market practice."
Environmental Finance has previously highlighted that this approaching 'maturity wall' for sustainable bonds is set to reshape the market. According to Environmental Finance Data, more than $850 billion worth of sustainable bonds are set to mature in 2025 and 2026 – which is set to more than double the volume that has matured to date.
Marciel said another potential driver of issuance growth was regulation – in particular, the growing use of taxonomies globally.
"Some may see regulation as something that is essentially burdensome," he said. "But when you see the multiplication of taxonomies around the world, for example, it is an important sign that should be given the right attention.
Read the full article in Environmental Finance.