ING sees moderate growth in ESG bonds

ING sees moderate growth in ESG bonds | Daily Tribune

The Netherlands-based ING expects global issuance of environmental, social, and governance (ESG) bonds to grow moderately this year to €1 trillion.

ING said issuance of ESG bonds denominated in non-US dollars to grow “soft” at €260 to €270 billion.

Meanwhile, it projected the supply of US dollar-denominated ESG bonds to remain “stable” for the rest of the year at €225 billion.

“As the rates and macro environment remains stable, the higher yield in credit keeps demand very high, whilst risks and uncertainty still loom for the second half of the year, for instance around upcoming elections in the US,” ING explained.

ESG bonds support businesses that deploy environment-friendly practices and finance projects that help mitigate climate change and improve the socioeconomic conditions of vulnerable groups.

ING’s data for the first quarter showed global investors mostly sought green or environmental bonds, driving their total issuance to $207 billion out of the entire ESG bonds supply of $409 billion.

ING said such a volume of green bonds was higher than the $160 billion average supply recorded in 2021 and the years after.

Despite the continued demand for ESG bonds amid high interest rates, ING said supply of such bonds could also be limited by stricter regulations.

“Outlook for the remainder of the year remains hard to predict. Not only because of general economic or geopolitical uncertainties but also because the deal structuring process often has become more time-consuming and complex because of increased scrutiny from regulators,” it said.

Dutch bank ING said it offered last year ESG bonds mostly in Europe, the Middle East, and Africa with a combined 70 percent share of its 156 transactions during the period.

However, ING said the rest of Asia and the Pacific will likely see higher demand for ESG bonds this year due to “less volatile” markets in the region.

“Sustainability-linked structures are the outlier in terms of volume growth, in EMEA and Americas, whereas in APAC sustainability-linked loans still showed growth in line with market growth,” it said.