Yerlan Syzdykov

The new Emerging Market Green Bonds Report from Amundi, Europe’s largest investment manager, and International Finance Corporation (IFC) shows the issuance of green, social, sustainability and sustainability-linked (GSSS) bonds proved to be more resilient than the broader global fixed income market in 2022.

This is the fifth edition of the Emerging Market Green Bonds Report, which reviews key green, sustainability, sustainability-linked and social (GSSS) bond market trends of 2022 and outlines our expectations for 2023 and beyond. It also discusses the implications for the asset class of recent developments in policy, regulation, and technology.

The US$877 billion issued last year represents a 13% reduction for GSSS bond issuance, its first ever annual drop, compared to the 26% drop of overall fixed income issuance globally. This also represents an all-time high market penetration of almost 14% for GSSS bonds.

Globally, green bonds remain the best-established, largest, and most liquid component, accounting for 56% of the GSSS market.

Sustainability bonds became the largest sub-segment in emerging markets (excluding China) at 41%. Financial institutions represented the single largest class of green bond issuers in 2022, accounting for 52% of the total issuance in emerging markets (including China).

Yerlan Syzdykov, global head of emerging markets at Amundi, noted “Focusing on green bonds in emerging markets, China became the largest issuer globally, advancing 61% over the year with $68 billion issued. The Middle East and North Africa became the most significant regional contributor to green bond issuance (outside China). South and East Asian countries (excluding China) registered a 33% drop, Latin American countries had a 49% decline, and issuance in Eastern European and Central Asian countries halved.

“The report projects GSSS bond issuance growth of 14% for 2023 in emerging markets outside China, to be driven by countries’ need to meet climate targets and accelerate the energy transition.

“The report recommends imposing tighter disclosure requirements and pursuing greater homogenization of green taxonomies to increase transparency and reduce fragmentation. It examines the role of central banks in making financial markets supportive of green transitions. Furthermore, innovative financial instruments such as synthetic securitizations can complement funding made available by fixed income markets by broadening sources of capital for banks and leading to increased climate-related lending.”

IFC and Amundi mark five successful years in developing the green bonds market in emerging markets

Five years ago, the International Finance Corporation (IFC) and Amundi joined forces to establish the Amundi Planet Emerging Green One (AP EGO) Fund to catalyse private capital from institutional investors in Developed Markets and to channel the capital flows to green investments in emerging markets (EMs).

At the time, in 2018, the green bond market, especially in emerging markets, was still nascent. However, the Fund successfully raised US$1.4 billion, and AP EGO was launched as the world’s largest green bond fund focused on Emerging Markets – targeting green bond issuances from banks and financial intermediaries.

With this large scale, the Fund created strong demand to invest in EM financial sector green bonds, which has in turn led to further investor interest in green bonds from other types of EM issuers. In parallel to AP EGO, the highly successful Green Bond Technical Assistance Program (GB-TAP) was established to stimulate the supply of green bonds (from financial sector issuers) in emerging markets.

AP EGO has been following an ambitious greening schedule, currently with 84.3% of total AUM (cumulatively US$1.4 billion) invested in emerging market green bonds. In that regard, GB-TAP has contributed to the issuances of 77 green, social, sustainability bonds, mobilizing more than US$ 5.5 billion in climate investment.

The AP EGO Fund has demonstrated the proof of the concept and its effectiveness in fostering sustainable investments in Emerging Markets, especially since other similar EM-targeted funds focused on green bonds have been subsequently established. IFC remains committed to developing the EM green and sustainable bond markets and continue to make a lasting difference.

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