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Asia Q3 sustainable bond market grows slightly
Decline in most regions reflects general market contraction, COP28 fuels Q4 optimism
Jayde Cheung 13 Nov 2023

Amid a declining global bond market battling a high interest rate environment, the sustainable bond market shrunk substantially, allowing the Asia-Pacific region to push its share of the global sustainable bond market to 28% during the third quarter of 2023, while Europe, the world’s largest issuer, saw its shared pared back by almost 10%, according to a recent report.

Overall, global issuance of green, social, sustainability and sustainability-linked bonds (sustainable or GSSS bonds) totalled US$198 billion in the third quarter of 2023, down 26% from the previous quarter and down 13% from the same period in 2022 and 16% year on year, according to data in a Moody’s Investors Service report. The US$198 billion represents the lowest quarterly issuance of GSSS bonds since the fourth quarter of last year.

Green bond volumes contracted by 37% to US$100 billion during the third quarter of 2023, the lowest quarterly level since 2020. Green bonds held a 50% share of the global sustainable bond market in the quarter. “Global sustainable bond volumes remain underpinned by green bond volumes,” Moody’s notes, “with the decrease in broader issuance in the third quarter largely attributable to this segment.”

Although around US$42 billion in social bonds were issued globally during the third quarter, volumes declined from their second-quarter spike of US$54 billion to more modest levels achieved in recent quarters. “More than 60% of global social bond issuance during the third quarter of 2023 originated from Asia-Pacific issuers,” the report states, “which accounted for US$25 billion, 38% of which is from the Korea Housing Finance Corporation.”

Sustainability bond issuance totalled nearly US$37 billion in the third quarter, a 13% decline from second-quarter issuance and 18% lower than the same period during 2022. Supranational issuers continued to be the leading regional contributor to the sustainability bond market in the third quarter, Moody’s shares, with US$14 billion of issuance accounting for 38% of the global total. Asia-Pacific issuers brought US$7 billion to market in the third quarter, accounting for 20% of the global total.

Sustainability-linked bond volumes totalled US$19 billion in the third quarter of 2023, the report details, a 73% increase from the second quarter of the year. The third-quarter increase is the largest quarterly growth in the segment since 2021, in large part because of the US$7 billion of repeat issuance from the Government of Chile. “The sovereign added in a gender related key performance indicator to its framework, pledging women will comprise at least 40% of the directors of companies under the scope of the country’s Financial Markets Commission,” Moody’s says, “as well as offering to convert outstanding bonds to sustainability-linked notes.”

However, the decline in issuance, the report notes, was not isolated to the sustainable bond market, with the global bond market battered by the high interest rate environment, experiencing a 22% decline in the third quarter, according to data from Dealogic.


Amid the third quarter’s declining sustainable bond issuance, issuance varied widely by region. The Asia-Pacific region stood out with modest growth of 1% and Europe, with a substantial decline of 39% from the second quarter, according to the report.

“Despite the decline in absolute volumes, European issuance remained dominant at just under US$80 billion in the third quarter, representing a 40% share of market,” the report says. “However, this was the lowest quarterly share for the region since the fourth quarter of 2020.”

As a result of the increase in absolute volumes in Europe, Asia-Pacific issuance surged to a strong 28% of global sustainable bonds, the highest share of market for the region since the fourth quarter of 2018.

In the Latin American and Caribbean region, issuers brought US$14 billion to market in the third quarter, the report finds, while Middle East and African issuers brought nearly US$4 billion to market, contributing to a 9% combined share of global issuance from these regions.

In North America, issuance remained subdued in the third quarter, with US$24 billion in issuance representing the lowest total since the second quarter of 2020. 


From a sectoral perspective, sustainable bond issuance remains diverse, the report details, with non-financial companies, financial institutions and government agencies each representing at least 20% of total issuance in the third quarter.

Non-financial corporate volumes, despite a leading 32% share of global issuance, declined 14% to US$63 billion in the third quarter compared with the previous quarter. Issuance volumes from this segment included transactions from automotive companies, such as Toyota, Hyundai and Volkswagen. “We anticipate volumes from automotive issuers will remain strong as companies in the sector,” Moody’s notes, “continue to finance their scaling up of electric vehicle production with sustainable bonds.”

Government agencies issued US$40 billion during the third quarter of the year, a 13% decline from the US$46 billion issued during the second quarter.

Financial institutions pulled back in the third quarter to issue only US$39 billion, down from the US$56 billion and US$52 billion issued during this year’s first and second quarters, respectively. The largest sustainable bond by a Japanese financial institution, Moody’s notes, came from Mizuho Financial Group during the third quarter, a US$1.4 billion green bond with proceeds going towards renewable solar and wind projects.

Sovereign issuers had the largest quarter-on-quarter decline, the report finds, as they only issued US$23 billion, down 62% from the US$61 billion during the second quarter of this year.

Supranational issuance also declined in the third quarter to US$18 billion, down 11% from the second quarter, while global municipal issuance recovered moderately, increasing 3% from the previous quarter to US$14 billion in the third quarter.

COP28 fuels Q4 optimism

Despite the decline in third-quarter issuance, the report predicts, that volumes would remain on track to achieve Moody’s forecast of US$950 billion for the full year 2023, following a relatively strong first half of the year.

Three main factors are fuelling the rating agency’s optimism, chief among them is the upcoming COP28 climate summit, which will take place in Dubai in the United Arab Emirates, from November 20 to December 12, and which Moody’s believe will “support global sustainable debt market activity, particularly with respect to sovereign issuance, transition finance, emerging market activity and adaptation-focused projects”.

As well, globally there is a rising focus on nature and biodiversity risk to support diversification and sustainable bond proceeds over time, the report notes, and regulatory and market developments are expanding to combat green washing.

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