The issuance of emerging market green bonds linked to sustainability and social factors is expected to grow at an annual rate of 7.1 per cent between 2023 and 2025, according to a new report by Amundi Asset Management and the International Finance Corp.
It found in 2023, emerging market green bonds surged 45 per cent to net $209 billion and are expected to increase further to US$240 billion by 2025. Indeed, the report cited easing inflationary worries and benign growth outlooks in emerging markets as the main drivers behind the recovery trend for these bonds. It also attributed growing sales of these bonds to governments and companies that are stepping up efforts to confront climate challenges, as well as ongoing improvements in regulation and maturing financial markets.
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The renewables segment accounted for 37 per cent of the proceeds from green bonds in emerging markets, with green buildings (29 per cent) and water projects (12 per cent) increasing significantly in bond proceeds in 2023.
The emergence of institutional investors in the Middle East was another driver for the adoption of green bonds in 2023. The region was the largest emerging market green bond issuer outside of China in 2023, with sales reaching US$20.4 billion, a 17 per cent increase from seven per cent in 2022.
“We expect [green] bond issuance from the [Middle East] to continue to expand for some years on account of ongoing economic dependence on the hydrocarbon sector and vulnerability to water scarcity,” the report said.