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SEB’s Green Bond Report: 2023 Transition and Sustainable Financing Outlooks

Sustainable Financing Outlooks

In a special edition of SEB’s The Green Bond report, we issue outlooks for renewable energy investment and for the sustainable debt market next year. We forecast that 2023 could be the year when the world finally breaks with a decade of stagnation in renewable energy investment, with an expected jump of about 25 per cent in global investments to close to USD 600 billion. Regarding sustainable financing, we forecast that global transactions will rebound and reach a total of USD 1.76 trillion next year – equaling the record set in 2021 and with the potential of 2023 becoming the strongest year ever for sustainable bonds and loans.

In the transition outlook, we look at how the energy crisis has exposed the shortcomings of the existing infrastructure but also at how it serves as a catalyst for a surge in investment. The past year was in our view a major turning point in the energy transition and will likely go down in history as a political and economic turning point – the year when an accelerated transition truly began after a lost decade of stagnation and when the world finally started aligning short-term investment with long-term climate-related objectives.

“After a watershed year for the global energy transition, we expect renewable energy investment to jump 25 per cent to almost USD 600 billion in 2023 as the energy crises works as a catalyst for a surge in investments,” says Thomas Thygesen, Head of Research, Climate & Sustainable Finance, at SEB. “We expect to see a major increase in Europe’s renewable energy investment, driven by governments, the EU Commission, as well as households and business building local supply to complement the centralized system.”

The report also features an outlook for sustainable financing for 2023 where we expect a return to new highs. If the general global debt market stabilizes, SEB forecasts that the global volume of sustainable bonds and loans will grow to USD 1.76 trillion in 2023. That compares with an estimated total transaction volume of USD 1.55 trillion in 2022 and USD 1.69 trillion in 2021. Sustainable bonds and loans will return to growth and continue to take an increasing market share of the general debt market.

“Growth in 2023 will be driven by a stronger sustainable bond market as investments ramp up and uncertainties about interest rates, energy prices and other economic downside risks subside,” says Gregor Vulturius, Advisor at Climate & Sustainable Finance at SEB. “This will help clear the backlog of sustainable bond financing that have been put on hold during 2022. At the same time, increased regulatory and investor scrutiny means that issuers of sustainable bonds will have to put more effort into showing ambition and impact.”

Source: Skandinaviska Enskilda Banken AB (SEB)

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