By 2026 half of all bonds issued in Europe will be green, social or sustainable bonds according to new market data.
PwC Luxembourg’s new report estimates that there will be between €1.4trillion and €1.6 trillion of these sustainable or social impact bonds issued by 2026, around half the expected market.
Last year there were a record €500bn of green, social and sustainable bond issued in Europe – a record figure that accounted for around 13.7 per cent of total bond issuance.
However this PwC report, written in conjunction with Strategy&, anticipates rapid further growth in this market, from both existing and new players operating across both public and private sectors.
According to the survey, 84 per cent of issuers intend to increase their GSS offerings in the next 24 months. Among them, 88 per cent of them plan to increase their issuances by more than 5 per cent, with 35 per cent of those surveyed preparing increases of over 20 per cent.
This growth is being driven by increased demand from investors. A total of 67 per cent of PwC’s surveyed issuers have experienced higher oversubscription for GSS bonds in comparison to their plain vanilla counterpart.
A total of 88 per cent of investors surveyed say they will further increase their allocation to GSS bonds in the next 24 months, with 3 out of 4 investors targeting allocation increases of over 5 per cent.
Within this broad ESG fixed income category, PwC is expecting that there will be around €691.2bn of new green bonds, €317.1bn of new social bonds and €391.8bn of new sustainability bonds.
Olivier Carré, financial services market leader and sustainability sponsor at PwC Luxembourg says: “The political and regulatory shift in the EU triggers a seismic shift re-directing capital flows towards sustainable economic activities.
“This changes the strategic relevance of the GSS bonds instrument. In particular for CFOs of companies in transition towards more sustainable activities or with a mixed business book the issuance of GSS bonds can help financing such transition and qualify as eligible investment for investors subject to SFDR and EU Taxonomy.”
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