Sales of green bonds fell 18 per cent year on year in the third quarter of 2018, as the market for environmental finance plateaus after several years of eye-popping growth. In the three months to end-September, issuers around the world sold $31.6bn of green-labelled debt according to research by credit rating agency Moody’s — 30 per cent lower than the amount sold in the second quarter, and also down on the $38.5bn sold in the same quarter of the previous year.
Although sales in the first quarter of this year showed strong year-on-year growth, volumes have since stuttered, leaving the year-to-date total roughly in line with the same nine months of last year, when issuers sold $110bn of green bonds, Moody’s data shows.
Moody’s had originally forecast that total green bond sales this year would hit $250bn, a considerable increase from last year’s record $163bn total; after sales slowed in the second quarter, it revised that prediction down to $175-200bn. However, the slowdown in the third quarter puts even that forecast at risk.
“At this rate, the market remains below the pace needed to achieve our revised full-year forecast,” said Matthew Kuchtyak, an analyst at Moody’s.
Mr Kuchtyak attributed the drop-off in growth to the wider market conditions, where a sustained series of sell-offs across risk-exposed asset classes in the past six months has hit overall bond sales. Global aggregate bond issuance is down 5 per cent year on year in the first three quarters of this year.
In addition, Moody’s highlighted growth in other types of ethical investment, which Mr Kuchtyak said will “potentially shift some issuance away from the green bond market, as issuers observe social benefits in some of the environmentally friendly projects they are financing.” Some $22bn of social and sustainability bonds were sold in the first nine months of this year, up 82 per cent year on year.
The current slowdown is not expected to continue, Mr Kuchtyak added: “Based on our discussions with green bond market participants, current market slowness is merely a blip on the radar, and long-term interest in the market remains strong and growing.”
Source Financial Times