The issuance of green, social, sustainability, sustainability-linked and transition bonds, collectively known as sustainable bonds, amounted to US$238 billion in the second quarter of 2024, down by 20% compared with Q2 2023, and 19% with Q1 2024, according to a Moody’s report.

Of the five bond types, green bonds account for the largest part of the issuance in Q2 2024, coming in at US$146 billion, followed by sustainability bonds at US$41 billion, social bonds at US$39 billion, sustainability-linked bonds at US$8 billion, and transition bonds, the most niche offering, at US$3 billion.

Issuances of all five types were lower in the second quarter of the year than in the first, with green bond slowed by 12%, sustainability bonds by 29%, social bonds by 10%, sustainability-linked bonds by 18%, and transition bonds by 72%.

Collectively, the issuance of sustainable bonds in the first half of 2024 totalled US$534 billion, which is lower than the volume in the same period last year at US$581 billion. In addition, sustainable bond issuance as a share of overall bond issuance globally, Moody’s notes, decreased across all regions for the first half of the year to about 11%, the lowest since 2020.

Issuer-wise, the report finds a continual decline in the number of first-time sustainable bond issuers in the first half of 2024. Historically, the global average of debut sustainable bond issuers per month peaked at 76 in 2021, dropping to 51 and 33 in 2022 and 2023, respectively, and is currently down to 20.

Regionally, the decline in new issuers was sharper in Europe and North America than in Asia-Pacific, due to rising interest rates, high inflation and high economic uncertainty.

Despite the decline of issuances in the second quarter, the global annual issuance of sustainable bonds, Moody’s says, is still on track with its forecast of US$950 billion and is still likely to reach US$1 trillion. In particular, there are high expectations regarding the growth of transition bonds, which are likely to remain the most popular in the Asia-Pacific region over the near term given the region’s high potential for accelerated energy transition.

Currently, transition bond issuance is dominated by the Japanese government, but Moody’s expects more entrants over time as the focus on transition finance continues to grow.