S&P downgrades forecast for sustainable bond issuance

Standard & Poor's has revised down the forecast for global green, social, sustainability, and sustainability-linked bonds by 16% for 2022. Dennis Sugrue, the Director of Sustainable Finance at S&P Global, shed light on the reasons behind this downgrade in an interview with CNBC Africa. The challenges in credit conditions have been exacerbated by factors like rising inflation rates, the prolonged impact of the conflict in Ukraine on food and energy prices, and the shift from low to rising interest rates. These macro-level trends have influenced the global bond issuance landscape, consequently impacting the sustainable bond space as well. Despite this downgrade, there are pockets of resilience and growth in the market, particularly within the financial services sector. Financial institutions such as banks and insurers have shown an 11% growth in sustainable bond issuance in the first half of the year. This growth can be attributed to favorable financing conditions for investment-grade issuers, as well as a strategic focus on sustainability amidst challenging economic conditions. Companies in the financial sector are leveraging sustainable bonds to support their net-zero goals and continue lending activities. While significant progress has been made in sustainable bond issuance globally, Africa remains a small player in the market, comprising less than half a percent of total issuance. However, there has been a notable increase in sustainable bond issuance from African entities since 2018, driven by initiatives like South Africa's green finance taxonomy. The development of sustainability-linked bonds presents an opportunity for African markets to access sustainable finance, as these instruments offer flexibility in the use of proceeds for general corporate purposes. Looking ahead, there is optimism for growth in sustainable bond issuance in developing economies across Asia Pacific, Latin America, and Africa. The sustainability-linked bond market, in particular, is poised for expansion and can serve as a catalyst for increased participation in sustainable finance in the region.