Green bonds, public issues slow. But Europe remains leader

Ahead, but judiciously. They may not be the sensational numbers that were expected from bonds bearing the ESG label placed by government issuers, but the European market has confirmed itself as the global leader for these instruments and will continue to do so this year, at its own pace. The confirmation comes from analysts at Generali Investments, who put the entire sector of sustainable bonds placed in the Eurozone by states and other public entities such as supranationals and agencies (SSAs) under the lens.

The year just behind us can certainly not be considered disappointing: according to the surveys carried out by Dealogic for Il Sole 24 Ore, the Eurozone states have issued ESG bonds for a total volume of 43.8 billion euro (including the first 10 billion euro 'green' BTp), to which just under 130 billion euro placed by the SSAs have been added, bringing the total amount to approximately 173 billion euro. This figure is slightly below the previous year's figure, but still maintains the world leadership in the sustainable bond market with a share of over 40 per cent.

The broader picture actually hides traits that are anything but homogeneous, especially when looking at the type of instrument. Almost two-thirds of the new EGGS government bonds placed have been green bonds," points out Florian Späte, senior bond strategist at Generali Investments, who instead blames the overall slowdown on the share of social bonds: "This," he adds, "has continued to decline, especially when one considers the issues linked to the pandemic, given that the European Union has no longer placed Sure bonds.

The level of activity on the primary market was in any case affected by a more difficult context for the fixed income market, created, according to Generali, by 'supply chain disruptions, volatility, inflation and rising financing costs'. To these factors, common to all bonds, were then specifically added, according to Späte, 'accusations of greenwashing and anti-Esg movements', which weighed particularly heavily on sustainable bonds.

The year 2024 seems to have started with the wind in its sails, in line with other fixed income segments. Dealogic notes that since the beginning of the year, government ESG bonds totalling EUR 44.2 billion have already been issued, an absolute record for the month of January, with green bonds leading the way (EUR 27.1 billion). Generali, for its part, remains cautiously optimistic for the months to come: "We expect an issuance volume in line with that of 2023," confirms Späte, who also sees continuity for the most recent dynamics, with a slight increase in sovereign issuance and a decrease in the SSA sector. "Europe will defend its dominant position," the analyst is nevertheless convinced, "while North America is expected to lag behind as presidential elections and anti-Esg movements could keep some issuers on the sidelines, pending greater political clarity.