Geographically, 20% of all European bonds are now green, social and/or sustainable, with Europe becoming the region issuing the largest number of GSS bonds at 66%.
Issuance of green social sustainable (GSS) bonds reached a record-high last year, with 3,184 individual bonds coming to market in 2023.
According to MainStreet Partners' fourth-quarterGSS Bonds Market Trend report, the number of GSS bonds launched last year surpassed the "historic" €4trn total amount of issuances record.
However, although $930bn of GSS bond were brought to market in 2023, this marked a 9% annual decline amid the uncertainty of the high inflationary and high interest rate environment of the past 18 months, the firm said.
The number of debt issuers also fell over the course of the year by 13%, with 517 first-time GSS bond issuers last year, down from 594 in 2022.
Green bonds issuance surpasses $2.5trn
Yet MainStreet argued this signalled that, while there are fewer new entrants, those who have already issued GSS bonds are now issuing more instruments of this kind and at higher financial volumes.
Geographically, 20% of all European bonds are now green, social and/or sustainable, with Europe becoming the region issuing the largest number of GSS bonds at 66%, while France was the largest cumulative issuer last year.
In terms of labels, ‘green' was the preferred name for GSS bonds last year (56%), followed by sustainable (19%) and social (16%).
MainStreet also discovered SFDR Article 9 GSS bonds fared better than their Article 8 counterparts with regards to gathering strong inflows; whereas Article 8 GSS bonds suffered outflows.
Pietro Sette, research director at MainStreet Partners, said the firm's latest report suggests the GSS bond market is reaching a "maturation phase" with issuance reaching record highs from entities which previously used such bonds as part of their fixed income portfolio.
Green bonds hit record fundraise while lending and M&A sink
"This indicates GSS bonds becoming a mainstream component of investor portfolios, both in retail and institutional," he said. "We believe GSS bonds are at a pivotal point where there is a real paradigm shift for fixed income investors' risk management.
"Thanks to reported post-issuance data, bonds are not associated with just the risk from the issuer's country anymore, but we can now pair that information with the risk spurred by the location of the projects financed," Sette added.
"This is an exciting development, allowing investors using our tools to go ‘beyond the label' and better quantify the positive impact of their allocation."
