Green bond sales in emerging markets fell in 2024, but long-term momentum remains strong, according to a report by asset manager Amundi and the International Finance Corporation (IFC).
Global issuance of green, social, sustainability, and sustainability-linked (GSSS) bonds reached a record $1 trillion in 2024. Despite this, short-term forecasts for emerging market issuance remain clouded by economic uncertainty, regulatory shifts and downward investor sentiment on ESG, shared Amundi.
Emerging market GSSS bond sales fell 14% year-on-year, largely due to a slowdown in China’s green bond activity, as issuers increasingly turned to conventional onshore bonds. In markets outside China, the decline was linked to a broader 23% contraction in fixed income issuance amid weaker economic conditions in Asia and Europe.
Still, according to the report, green bond penetration in emerging markets outside China reached more than 5%—higher than levels seen in both China and developed markets.
The demand for healthcare-related funding has eased since the end of the pandemic, resulting in a stabilisation of social bond issuance. Social bonds formed around 6% of total GSSS bond issuance in emerging markets between 2022 and 2024. In contrast, sustainability-linked bonds saw a decline—reflecting criticism over their structural weaknesses, including weak penalty mechanisms that fail to hold issuers accountable for missing sustainability targets.
About $330 billion in GSSS bonds are set to mature over the next three years, according to the data, likely prompting a new wave of refinancing. Investments in clean energy are also expected to double in the coming years, supported by falling costs in renewables and increased commitments from multilateral institutions. Since 2018, clean energy investments in emerging markets have risen more than 70%, with China alone recording a 170% increase, highlighted the researchers.
As of 2024, sustainable funds reached $3.6 trillion in assets under management from $1.4 trillion in 2018 with fixed income allocations increasing to 22%. However, the so-called “greenium,” or yield discount enjoyed by green bond issuers, dipped.
Yerlan Syzdykov, global head of emerging markets, at Amundi, commented: “The GSSS bond market is experiencing significant diversification. Although green bonds have long dominated GSSS emerging market bond issuance, there is a growing shift toward sustainability bonds. This trend is pronounced among multilateral institutions and, more generally, among issuers outside China that are seeking the flexibility of sustainability bonds to finance both environmental and social projects.
Source: Fund Europe
