This shows that the overall market for sustainable finance in emerging markets and developing economies (EMDEs) staged a rebound in new debt issuance last year on the back of lower inflation expectations.
Meanwhile, the broader category of Global Green, Social, Sustainability and Sustainability-Linked (GSSS) bonds issuance exceeded $1 trillion in 2023. This matches the all-time high reached in 2021.
GSSS performance helped this segment increase its weight in international capital markets to account for 2.5% of global fixed income issuance in 2023. This is up from 2.2% in 2022.
“This growth can be largely attributed to governments and companies stepping up efforts to confront climate challenges in developing economies,” says the Emerging Market Green Bonds Report, released by European asset manager Amundi and the IFC.
Yerlan Syzdykov, Amundi Global Head of Emerging Markets said they anticipate continued growth in green bonds issuance within emerging markets to be driven by several factors over the medium term.
These factors are, “an acceleration of the energy transition, a competitive pricing advantage for issuers compared to developed markets, and favorable macroeconomic conditions, such as high nominal yields at a time of relatively slow growth, which typically favors fixed income over equities.”
The sixth edition of the Emerging Market Green Bonds Report focuses on green bond issuances in EMDEs as well as the overall sustainable bonds market growth, perception and outlook.
The report suggests that growth in emerging markets sustainable bonds issuance will continue through 2025. The forecast is for 7.1% year on year growth for Global Green, Social, Sustainability and Sustainability-Linked (GSSS) bonds and 7.5% growth for green bonds.
This outlook assumes a relatively stable global backdrop of easing inflation without major escalations in geopolitical tensions.
Susan Lund, IFC Vice President – Economics and Private Sector Development, said financing sustainable projects in emerging market economies will require deeper capital markets to fund economic and energy transitions.
“To achieve these goals, substantial efforts must be made to ensure continued growth in the Global Green, Social, Sustainability and Sustainability-Linked bonds market, including enhancing regulations and standardising best practices.”
China was the largest issuer of green bonds into emerging markets in 2023 to the tune of $89.1 billion. This represents a 18% growth year on year.
In EMDEs outside of China, GSSS bonds issuance was mostly driven by green bonds and this increased by 81%.
In the Middle East and North Africa – notably UAE and Saudi Arabia – green bonds issuances more than doubled.
The largest share of funds raised from the green instruments in EMDEs during 2023 was allocated for renewable energy projects, at 37%. The next biggest allocation was for green buildings at 29% of the total, up from 9% a year earlier.
“Africa saw a number of important developments including Rwanda Development Bank’s first sustainability-linked bond (SLB), a blue bond ‘debt-for-nature swap’ from Gabon, and a first ever green bond from Zambia, issued by the Copperbelt Energy Corporation and focused on biodiversity.”
That Zambian green bond raised $53.5 million.
Borrowers in Sub-Saharan Africa increased green bond issuance in 2023 by 125%. Though, to be fair, this was to reach $1.4 billion in 2023 off the back of $600 million in 2022.
Despite this growth, SSA is still the least established regional green bond market among developing economies.
“It is noteworthy that while green bonds issued in 2023 amounted to the equivalent of 0.3% of GDP for emerging markets, for Sub-Saharan Africa the proportion was under 0.1%.”
“Within the region, South Africa remains the most significant issuer, with $900 million in green bonds sold over the year, 58% more than the previous year.”
And in encouraging news, Rwanda’s Green Taxonomy was announced in December 2023. It is meant to define sustainability criteria, ensure transparency in ESG reporting, build trust in green investment and prevent greenwashing.
The Rwanda Green Taxonomy supports the East African country’s green growth development which will need an estimated $11bn for its 2030 Climate Action Plan.
The taxonomy focuses on agriculture, construction, transport and the energy sector for climate change mitigation and adaption. It is supposed to help Rwanda position itself as a sustainable finance hub in East Africa.
Read more in the Emerging Market Green Bonds Report
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