ESG Finance Report Q3 2022 - European Sustainable Finance | AFME

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Data Research
ESG Finance Report Q3 2022 - European Sustainable Finance
09 Dec 2022
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Author Julio Suarez Director
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AFME is pleased to circulate its European ESG Finance quarterly data report for the third quarter of 2022. The aim of this report is to provide detailed data and analysis on the rapidly growing Sustainable Finance market in Europe.

This Report contains up to date trends for the European Sustainable Finance market as at 30 September 2022, as well as a high-level regulatory and supervisory snapshot.

Key highlights:

  • European ESG bond and loan issuance accumulated a total of €155bn in proceeds, bringing the total year-to-date issued amount to €502bn. The year-to-date amount represents a 11% YtD decline compared with the first three quarters of last year.

ESG bonds and loans include ESG-labelled bonds (proceeds-based), sustainable-linked bonds, transition bonds, green-linked loans and sustainable-linked loans.

  • Green bond issuance stands out as the ESG sub asset class that has grown the most during the year, accumulating an increase of 10% YtD notwithstanding the wider market turbulence.
    • Social bond issuance has accumulated a decline of 54%YtD, following the sharp slowdown in Social bond issuance by the European Commission. The strong participation of the French agency CADES has not offset the contraction in Commission Social bond issuance.
    • Sustainable bond issuance has declined 17%YtD, which is of similar proportion than the wider market contraction in non-ESG bonds during the year.
    • Sustainable-linked bond issuance continued to decelerate in Q3’22 following a sequence of record volumes observed in Q4’21 and in Q1’22. Total YtD issuance has accumulated an increase of 2%, predominantly driven by the strong issued amount in Q1’22.
  • Carbon prices: the European Union Allowance (EuA) price per metric tonne finalised Q3'22 at €66/Tn, from €80/Tn at the end of 2021. During the first months of Q4’22, EuA spot prices have increased to €78/Tn.
    • EU and UK forward curves continue to anticipate long-term price increases.
  • Global ESG Funds continued to decrease during Q2’22.
    • ​Funds with an ESG mandate (including Mutual Funds and ETFs) totalled $6.5tn as of Q3'22, a 12% decrease from Q2’22.
    • The annual decline was predominantly driven by valuation losses. Net outflows from ESG funds have accumulated $132bn during the year, which represents 5% of the decline in the total amount of Global ESG funds.
  • ESG price premia: spreads of corporate ESG bonds against non-sustainable benchmarks have widened in Q3’22.
    • Spreads of corporate ESG bonds against non-sustainable benchmarks have widened in the second half of the year from c1bps at the start of the year to c3bps in September 2022.
    • The greenium spreads for French, Dutch and some of the German green bond references have widened by between 2 to 4 bps during the year.
  • Regulatory update: We present a selective list of upcoming European initiatives for 2022 and 2023.