Australia-New Zealand's sustainable debt hit $26 billion
Global sustainable debt issuance reached US$807 billion in the first half of 2024, marking a 26% increase from the second half of 2023 and remaining largely consistent with the first half of 2023, which saw US$810 billion in issuance, Westpac has reported.
The growth was primarily driven by a surge in sustainable bond issuance, which contributed 78% of the total sustainable debt issuance in the first half of 2024, offsetting a weaker performance in the sustainable loan market.
Sustainable bond issuance totalled US$636 billion in the first six months of 2024, with sovereigns, supranationals, and agencies (SSAs) accounting for US$319 billion of that figure, according to the International Capital Market Association’s (ICMA) quarterly report.
As of June 18, sustainable bonds made up 12% of the overall bond market. Notable issuances included the Australian government’s $7 billion green bond and the Italian government’s €9 billion green bond.
Sustainable loan issuance held steady, with $171 billion issued in the first half of 2024, compared to $176 billion in the first half of 2023, despite broader market conditions negatively impacting overall loan volumes. Sustainability-linked loans have emerged as the third-largest sustainable debt instrument by issuance volume, representing 15% of the total sustainable debt market.
Westpac, in its latest quarterly sustainable finance market update, noted that in the Australia-New Zealand region, sustainable debt issuance mirrored global trends, with $26 billion issued in the first half of 2024, compared to $27 billion in the same period in 2023, with SSA issuers playing a significant role in maintaining these levels.
Sustainable bonds dominated the region’s sustainable debt issuance, contributing 84% ($22 billion) of the total. Green bonds reached record volumes of $11 billion in the first half of 2024, surpassing the previous high of $8 billion in the first half of 2023. This was supported by an increase in sustainability bonds, totaling $8 billion, driven by benchmark issuances from the South Australian Government Financing Authority (SAFA) and the New South Wales Treasury Corporation (TCorp).
However, sustainable loan issuance in Australia and New Zealand declined to $4 billion in the first half of 2024 from $8 billion in the first half of 2023. This decline mirrored broader contractions in the Asia-Pacific loan market, which saw a 37% drop in volumes compared to the previous year.
Notable use of proceeds issuances included the Australian Office of Financial Management’s (AOFM) $7 billion green treasury bond, which aims to support Australia’s transition to net-zero emissions by 2050. FleetPartners also issued a $75 million climate bond within a broader A$400 million asset-backed securities issuance, certified by the Climate Bonds Initiative, to finance clean transportation initiatives.
In terms of sustainability-linked loans, ISPT issued a $1.5 billion sustainability-linked syndicated term loan, while Inghams converted A$545 million of debt facilities into a sustainability-linked loan tied to its 2030 sustainability performance targets. Cromwell Property Group also completed the conversion of a $1.2 billion lending facility to a green sustainability-linked loan, with targets focused on reducing greenhouse gas emissions and improving gender diversity.
Policy developments in the sustainable finance space included a vote of confidence for sustainability-linked bonds following Enel’s missed emissions reduction target, which resulted in penalty rates on €11 billion of its bonds. Despite this, Enel returned to the market with a successful US$2 billion sustainability-linked bond issuance in June 2024.
The ICMA released guidance for green enabling projects and sustainability-linked loans financing bonds in June 2024, aiming to provide clear criteria and promote integrity in these emerging markets. The Loan Market Association (LMA) and Asia Pacific Loan Market Association (APLMA) are also developing Transition Loan Principles, expected to be finalised by November 2024, to facilitate financing for climate-related transition activities.
In Australia, the government published its Sustainable Finance Roadmap in June, outlining plans for mandatory climate-related financial disclosures and the development of a sustainable finance taxonomy. The Australian Sustainable Finance Institute (ASFI) also released its first public consultation paper on the taxonomy, focusing on climate change mitigation criteria for priority sectors such as electricity generation, minerals, and construction.
Recent reports from Bloomberg New Energy Finance and the International Energy Agency (IEA) highlighted the critical need for increased investment in clean energy technologies, with the IEA’s World Energy Investment 2024 report noting that clean energy investments are outpacing fossil fuel investments by a ratio of 2:1.
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