IFC—amemberoftheWorldBankGroup—isthelargestglobaldevelopmentinstitutionfocusedontheprivatesectorinemergingmarkets.Weworkinmorethan100countries,usingourcapital,expertise,andinfluencetocreatemarketsandopportunitiesindevelopingcountries.Infiscalyear2023,IFCcommittedarecord$43.7billiontoprivatecompanies
andfinancialinstitutionsindevelopingcountries,leveragingthepoweroftheprivatesectortoendextremepoverty
andboostsharedprosperityaseconomiesgrapplewiththeimpactsofglobalcompoundingcrises.Formoreinformation,visit.
AboutAmundi
Amundi,theleadingEuropeanassetmanager,ranking
amongthetop10globalplayers,offersits100million
clients—retail,institutionalandcorporate—acompleterangeofsavingsandinvestmentsolutionsinactiveandpassive
management,intraditionalorrealassets.Thisofferingis
enhancedwithITtoolsandservicestocovertheentire
savingsvaluechain.AsubsidiaryoftheCréditAgricolegroupandlistedonthestockexchange,Amundicurrentlymanagesmorethan€1.9trillionofassets.Withitssixinternational
investmenthubs,financialandextra-financialresearch
capabilitiesandlong-standingcommitmenttoresponsibleinvestment,Amundiisakeyplayerintheassetmanagementlandscape.Amundiclientsbenefitfromtheexpertiseand
adviceof5,400employeesin35countries.
EmergingMarket
EMERGINGMARKETGREENBONDS
Page2
Acknowledgments
ThisreportwaspreparedundertheguidanceofSusanLund,InternationalFinanceCorporation(IFC)VicePresidentofEconomicsandPrivateSectorDevelopment,andPaoloMauro,DirectorofIFC’s
EconomicandMarketResearchDepartment.
JoséAbad,alsoatIFC,wastheleadauthor.WorkingteammembersincludedQuentinAlbert,MohamedBenSlimane,AnggeRoncalBazan,SylviaChen,CharlesDupré,EricDussoubs,JoanElbaz,JulienFoll,
VictorHintzy,TimothéeJaulin,EstherLaw,MollyMintonfromAmundi,andSamedHysa,KaikhamOnedamdy,SelinGoncaOzyurt,JessicaStallings,andImtiazUlHaqfromIFC.
TheupdateoftheGSSSdatabasewasledbyJessicaStallingsandcompletedthankstoNimarjitSingh
fromIFC,whilethegreenbondissuanceforecastswererunbyMohamedBenSlimaneandVictorHintzyfromAmundi.
WethankpeerreviewersJamieFergusson,JohnGandolfo,KaikhamOnedamdy,LailaNordine,EmmanuelNyirinkindi,AyeletPerlstein,andTomaszTelma,allfromIFC,andTimothéeJaulinfromAmundi.We
arealsogratefulforthehelpfulcommentsandsuggestionsprovidedbyGonzaloFernándezattheInternationalMonetaryFund.
ChrisVellacottatIFCeditedthereportwithhelpfromBrianBeary,whileIrinaSarchenkowasresponsibleforgraphicsanddesignwithhelpfromAlisonHeasley.
Page3
TableofContents
Foreword4
KeyMessages6
ExecutiveSummary
7
Chapter1:
Introduction
9
Chapter2:
MarketDevelopmentsin20231
Chapter3:GSSSBondOutlook
33
Chapter4:ConcludingRemarks
38
Annex1:AnnualEmergingMarketGreenBondIssuancebyMarketSegment
40
Annex2:KeyGSSSBondIssuesin202348
Annex3:RecentNoteworthyInitiativesforSustainableFinanceinEmergingMarkets53
Page4
Foreword
T
hesixtheditionofthe‘EmergingMarketGreen
BondsReport’analyzessignificanttrendswithin
thegreen,social,sustainability,andsustainability-
linked(GSSS)1bondmarketsfortheyear2023,and
providesprojectionsfor2024andbeyond.Furthermore,itencapsulatesthelatestadvancementsinpolicyand
regulatoryframeworks.Similartopreviouseditions,
thisyear'sreportrepresentsacollaborativeeffort
betweenAmundi,aprominentassetmanagerinEurope,andtheInternationalFinanceCorporation(IFC),partoftheWorldBankGroup.
Collaborationwithfinancialinstitutions,theprivatesector,andgovernmentsisessentialtoIFC’smissiontomobilizeprivatecapitalforsustainabledevelopmentandclimate-relatedobjectives.Asapioneerinthegreenbondmarket,IFChasissued,since2010,morethan$12.6billioningreenbondsthrough198securitiesacross21differentcurrencies.
Moreover,IFCofferstechnicalsupporttobothissuersandinvestorsindevelopedandemergingmarkets,enhancingtheintegrityofthegreenbondmarket.IFChasalso
contributedsignificantlythroughitsleadershiponthe
executivecommitteeoftheGreen,Social,Sustainability,andSustainability-Linked(GSSS)BondPrinciples,servingaschairfromJuly2020toJune2022.
1Forafulldescriptionofeachcategoryofsustainablebond,seeBox1inChapter1
Amundicontinuestodedicateitselftothegrowthof
thegreenbondmarketandothersustainablefinance
instruments.ItspartnershipwithIFConinitiativessuchastheAmundiPlanetEmergingGreenOneandtheBuild-Back-BetterEmergingMarketsSustainableTransaction
funds,launchedin2018and2021respectively,aimstoboostboththedemandandsupplyofgreenbondsinemergingmarkets.
In2023,issuanceofGSSSbondssawsignificantexpansionindevelopingeconomies,reboundingstronglyfrom
thepreviousyear'sslump.Thissurgewasdrivenbya
confluenceoffactorsincludingeasinginflationconcerns,governmentalandcorporateinitiativestoaddressclimatechallenges,andmorefavorablefinancialconditions.
Regulatoryprogressinmultiplejurisdictionssupportedthemarket'sexpansionbyestablishingclearerguidelinesforsustainablefinanceinanumberofregionswhichinturnislikelytomaketheseassetsmoreappealingto
internationalinvestors.
Muchofthegrowthinissuanceseenin2023wasdrivenbysovereignborrowersseekingfundsastheysteppedupeffortstomeetclimatetargets.Asaresultoftheincreaseinsustainablebondissuance,significantinvestment
flowedintogreenconstruction,renewableenergy,andwaterprojects.Also,innovationsinsustainabilitycriteria,
Page5
SUSANM.LUND
VicePresident,EconomicsandPrivateSectorDevelopment,IFC
suchasChile'sinclusionofagender-basedperformance
indicatorinitssustainability-linkedbondframework,
underscoredabroadertrendofintegratingsocialgoalsintofinancialstrategies.
Overthemediumterm,weanticipatecontinuedgrowthingreenbondissuancewithinemergingmarketsdrivenbyanaccelerationoftheenergytransition.
Nevertheless,geopoliticaltensionsandthereputational
damagefromstillprevalentgreenwashing—misstatingtheextenttowhichfinancialinstrumentsmeetsustainability
FOREWORD
YERLANSYZDYKOV
GlobalHeadofEmergingMarkets,Amundi
criteria—posesignificantthreatstothisrosyoutlookfor
themarket.Anydownturnwouldseverelyimpactglobal
effortstoachievetheclimatetargetsestablishedbythe
2015ParisAgreements.Sustainablefinancemarketsare
crucialforaddressingthecapitaldeficitsinfundingeconomicandenergytransitionsinemergingmarketsbydirecting
privatesectorinvestmentstowheretheyaremostneeded.Consequently,substantialeffortsmustbemadetoensurecontinuedgrowthintheGSSSmarket,includingenhancingregulations,standardizingbestpractices,mobilizingpolicies,andraisingawareness.
Page6
KeyMessages
Bouncebackin2023
EmergingmarketGSSSbondissuancesurged45percentin2023toreach$209billion,anall-timehigh.IssuersoutsideChinaincreasedtransactionsbyaround65percentto$111billionwhilethosewithinthecountrysawa28percent
advancetoaround$98billion.
OutsideChina,GSSSbondissuanceinemergingmarketswasdrivenbygreenbonds,whichincreasedby81percent.IntheMiddleEastandNorthAfrica,mostnotablyUAEandSaudi
Arabia,greenbondissuancemorethandoubled.
DrivenbySovereigns
Theaccelerationingreenbondissuanceinemergingmarketsin2023waspartlydrivenbysovereignswhichmorethan
tripledtheirgreenbondsales.Theirshareoftotalemergingmarketgreenbondissuancejumpedto17percentfrom
7percentin2022.Butfinancialinstitutions,whichincreasedsalesofthesecuritiesby52percent,remainedthebiggestissuersofgreenbonds,selling58percentofthetotalversus
51percentin2022.Corporatessawtheirsharefallsharplyto
21percentfrom32percent.
UseofProceeds
RenewablescontinuetoclaimthebiggestshareoftheproceedsfromemergingmarketGSSSbondissuanceat37percent,flatfromthepreviousyear.Greenbuildingsclaimed29percent,upfrom9percentin2022,while
waterprojectshavealsobecomeincreasinglyimportant,representing12percentofissuancein2023,upfrom
8percent,onaccountoftheemergenceof“blue”bonds.
IssuanceOutlook
IssuanceofemergingmarketGSSSbondsislikelytogrow
atanannualrateof7.1percentoverthe2023–2025period,
withsalesvolumesrisingto$240billion,from$209billion
currently.Forthegreenbondsub-category,growthwill
befasterstill,at7.5percentperyeartoreach$156billionin2025.Thisoutlook,witha70percentprobability,assumesnoreversalininvestordemandforsustainableassetsalongsideemergingmarketsovereignandcorporateborrowers
steppingupeffortstofinanceclimatecommitments.
DriversofMarketGrowth
Easinginflationaryworriesandbenigngrowthoutlooksinmanyemergingmarketsarebehindmuchoftherecovery
trend.ButgrowthinGSSSbondsalescanalsobelargely
attributedtogovernmentsandcompaniessteppingup
effortstoconfrontclimatechallenges,alongsideongoing
improvementsinregulationandmaturingfinancialmarkets.
Page7ExECUTIVESUMMARy
S
ustainablefinance,thecapitalmarketusedby
borrowerstofundprojectsandinitiativeswith
soundenvironmentalandsocialcredentials,isboomingindevelopingeconomies.
Emergingmarketissuanceofgreen,social,sustainability,andsustainability-linked(GSSS)bonds,whichareeligibleinvestmentsforfundsfocusedonenvironmentalandsocialcriteria,surged45percentin2023toreach$209billion,anall-timehigh.
ForemergingmarketsoutsideChina,growthwasevenfaster,at65percent,reaching$111billionovertheyear.InChinaitself,meanwhile,GSSSbondissuanceadvancedby28percenttoaround$98billion.
Thismarksanimpressivebouncebackfromtheslumpinsalesseenthepreviousyearwheninflationstifleddemandamonginvestorswhowereworriedaboutthedecliningvalueoftheirbondholdings,whilerisinginterestratespromptedborrowerstoputtheircapitalraisingplansonhold.
TherecentgrowthinemergingmarketGSSSbondissuanceisalsosettocontinue,accordingtothecentralforecasts
outlinedinthisreport,risingbyaround7.1percenteachyearthrough2025.Thatmeanssalesvolumeswillreacharound$240billionin2025.
Therearemultipleforcesdrivingthisupsurgethatarelikelytostayinplaceoverthenexttwoyears.Easinginflationaryworries,projectedratecutsbytheU.S.FederalReserveandothercentralbanks,andbenigngrowthoutlooksinmanyemergingmarketsarebehindmuchofthetrend.
ButgrowthinGSSSbondsalescanalsobelargely
effortstoconfronttheclimatechallengestheyface,
transformingeconomiesandbusinessestomakethem
moresustainablewhilebuildingresilience.Allthisneedstobefundedandtheinternationalfinancialmarketsconnecttheseborrowerswithagrowingpoolofportfoliocapital
thatprioritizesenvironmental,social,andgovernancecriteriawhenchoosingassetstobuy.
Inshort,risingfinancingneedstofundgreentransitionsinemergingmarketsaremeetinggrowingdemandthatiscapableofabsorbingmoregrowthinGSSSbondissuance.
Atthesametime,financialandregulatoryconditionsare
favoringemergingmarketissuers.Marketgrowthisbeing
supportedbyongoingprogressbymarketsupervisorsin
establishingguidelinesforcategorizing,regulating,and
trackingsustainablefinanceinmultiplejurisdictions.This
meanssustainablefinancemarketsindevelopingeconomiesarebecomingdeeper,easingthewayformoreinvestmentcapitaltobuyupdebtissuedinthosemarkets.
Thisstudyalsoshowsthatthenewinvestmentisfindingitswaytowhereitismostneeded,notjustalleviatingtheperennialproblemofcapitalscarcityinemergingmarketsbuttargetingcrucialeconomicsectors.Dataonhowthe
proceedsofgreenbondsalesareusedshowarapidlyrisingsharegoingtowardgreenerconstruction,acentralpillar
ofmanyemergingeconomiesaswellasamajorsourceofgreenhousegasemissions.
Page8
Thelargestsliceofthemoneyraisedfromtheinstrumentsinemergingmarketsduring2023wasdesignatedfor
renewables,thoughat37percentthesharewasbroadly
stablerelativetothepreviousyear.Thenextbiggest
destinationformoneyraisedfromsalesofgreenbonds,andrapidlyclosingthegap,wasbuildings,claiming29percentofthetotalfrom9percentayearearlier.Waterprojects
havealsobecomeincreasinglyimportant,representing
12percentofissuancein2023,upfrom8percent.Thisis
duetoariseinsalesofbluebonds,asub-categoryofgreenbondsusedtoraisemoneyforwaterandocean-related
sustainability.Lowcarbontransportsawitscontributionfallto11percentfrom18percentin2022.
AmongthemostsignificantinnovationsovertheyearwithintheGSSSbondmarket,wealsohighlighttheinclusionofa
socialkeyperformanceindicatorinChile'sSustainability-
LinkedBondFrameworkthatwasupdatedinJune.This
introducedagender-basedmetrictargetinganincreasein
femalerepresentationontheboardsofcompaniesregulatedbytheFinancialMarketCommissiontoatleast40percentby2031.
Tobesure,astepupinGSSSbondsalescouldleadtomoredebtonbalancesheetsandissuers’capacityforborrowing
haslimits.Nevertheless,thereisroomforissuanceto
growfromcurrentlevelsandGSSSbondsstillrepresenta
fraction—around5percent—ofannualemergingmarket
bondissuanceoutsideChinawheretheproportionissmallerstill,at1.7percent.
ThisreportstartsbyoutliningthefinancialmarkettrendsthatunderpinthenewissuancemarketforGSSSbondsinemergingmarkets.Asecondchapterbreaksdownprimarymarketperformanceduring2023fromseveralperspectives,lookingatissuancebyregion,trendsintheuseofproceedsandotherfeatures.ThethirdchaptersetsouttheforecastscompiledbyAmundiforissuancevolumesoverthenext
twocalendaryears,andaconcludingsectionsketches
somepotentialconsiderationsforpolicymakers,regulators,investors,issuers,andmultilateraldevelopmentbanks
seekingtoensurethecontinuedhealthofthismarket.
Privateinvestmentisvitalforcoveringthefinancingneedsofgovernmentsandcorporationsseekingtomeetnet-zeroandotherclimatecommitmentsmadeatinternationalsummitssuchasCOP28,aswellasbuildingresiliencetoevermore
frequentextremeweatherevents.TheGSSSbondmarketisakeymediumforchannelingprivatefundstowardtheemergingmarketswhereitisneededthemost.
1
ustainablefinance—themarketfordebtsecurities
thatraisemoneyforsustainableprojectsand
initiatives—isinrobusthealthindevelopingeconomies.Newissuesbyemergingmarketcorporateand
sovereignborrowersduring2023ofgreen,social,
sustainability,andsustainability-linked(GSSS)bonds—seeBox1fordefinitions—areoftenencountering
ordersthatexceedtheamountofdebtbeingsold.2
Indeed,demandforthesesecuritiesmeanstheyields
onsuchdebtaresimilaroroccasionallybelowthose
onconventionalbondsinemergingmarkets,makingitattractiveforgovernments,corporations,andfinancialinstitutionstoraisemorecapital.
Severalfactorsdrivethis.Firstly,2023sawabroad
improvementinsentimentarounddebtcapitalmarketswithsustainablebondsenjoyinganevenmoreemphaticshiftin
mood.Theamountofnewmoneyflowingintoinvestment
fundsprioritizingenvironmental,social,andgovernance
(ESG)issuescontinuedtogrow,albeitataslowerpace
thanpreviousyears,3addingtoglobaldemandfornew
GSSSbonds.Meanwhile,authoritiesinmultipleemerging
economiesaremakingprogresstowardimplementing
guidelinesandcategorizationsystemsforsustainablefinance.Theyarealsoensuringthatthenewtaxonomiesarebetter
alignedandcomparablewiththoseinotherjurisdictions.
Thisisasignificantdevelopment.Investorsneedtobeable
toestimateriskwhenconsideringaddinganassettotheir
portfolioandthisisdifficult,inefficient,andcostlywhen
dealingwithmultiplesetsofrulesandcategorizationsthatareincompatiblewithoneanother.
Makingemergingmarketassetseasiertoassessforriskandpotentialreturnsbyinternationalinvestorsunlocksastill
growingpooloffundsfocusedoninvestmentsthatmeetESGpriorities.Thisbodeswellforgovernmentsandcompanies
indevelopingeconomiesthatmadecommitmentsat
internationalsummitssuchasCOP28inlate2023totransitiontheireconomiesandbusinessesawayfromfossilfuelsand
buildresiliencetotheconsequencesofclimatechange.Theirfundingneedsaresizablebutemergingmarketgovernmentstypicallyhavelessfiscalfirepowertomeetthoseneedsthantheircounterpartsindevelopedeconomies.Thatmeans
encouraginginternationalportfoliocapitaltomakeupthatshortfallisvitallyimportant.
ThissixtheditionoftheEmergingMarketGreenBonds
ReportoutlinespatternsinnewissuanceofGSSSsecuritiesbyemergingmarketborrowersthroughout2023and
presentsforecastsfornewsalesthrough2025,basedoncalculationsbyAmundi.
IssuanceofemergingmarketGSSSbondsrecoveredin2023fromthepreviousyear’sslump,tomatchthe$1trillionrecordsalessetin2021,arebounddescribedindetailinChapter2.
Thisreflectedongoinginvestordemandforemergingmarketandgreenassetsincontrasttothewidespreadnervousnessof2022amidpeakinginflationandmonetarytightening,
conditionsthatareunfavorableforbondmarketsentiment.4
Themomentumof2023issettocontinue,meanwhile,as
describedinAmundi’scentraloutlookscenarioinChapter3,withthestressesthatheldbacknewGSSSbondsalesin2022receding.TheremainderofthischapterdescribesthemarkettrendsunderpinningthisandhowinvestorappetiteforGSSSbondshasevolvedoverthepastyear.Indeed,itoutlineshowconditionsinmanyemergingGSSSbondmarketsarefavorabletoborrowersincomparisonwithdevelopedeconomies.
2Examplesofoversubscribedbondissuesduring2023includesovereigngreenbondsalesfromIndiaandTurkey,asoutlinedinAnnex2ofthisreport.
3SeeReuters,2023,”ESGfundssufferweakerdemanddespitehelpfromtech-sectorperformance,”availableat:
/sustainability/sustainable-finance-reporting/
esg-funds-suffer-weaker-demand-despite-help-tech-sector-performance-2023-12-21/
4SeeAnnex1fordetailsaboutthedataset,thesourcesused,andthemethodologyfollowed,aswellasanychangescomparedtopreviouseditions.
Page10
BOx1
DefinitionsandGuidelines
Greenbonds:Fixed-incomeinstrumentswithproceedsearmarkedexclusivelyforprojectswithapositive
environmentalimpact.TheGreenBondPrinciples(establishedin2014andlastupdatedinJune2022)
developedbytheInternationalCapitalMarketAssociation(ICMA)havefourcomponents:useofproceeds,processforprojectevaluationandselection,managementofproceeds,andreporting.Severalcountriesandjurisdictionshave
developedguidelinesforgreenbondissuance,manyofwhichalignwiththeGreenBondPrinciples.
Bluebonds:Asub-categoryofgreenbondsspecifyingthatproceedsareusedforfinancingwater-related
sustainableprojects.
Socialbonds:Proceedsfromsocialbondsaredirectedtowardprojectsthataimtoachievepositivesocial
outcomes,especially,butnotexclusively,foratarget
population.ICMA'sSocialBondPrinciples(introducedin2017,lastupdatedinJune2023)havefourcomponentsanalogoustotheGreenBondPrinciples:useofproceeds,
theprocessforprojectevaluationandselection,managementofproceeds,andreporting.
Sustainabilitybonds:Sustainabilitybondsaredebtinstrumentsthatraisemoneytofinanceorrefinanceacombinationofgreenandsocialprojects.The
SustainabilityBondGuidelinesestablishedbyICMA
(lastupdatedinJune2021)arealignedwiththecorecomponentsofbothGreenandSocialBondPrinciples.
Sustainability-linkedbonds:Theseinstrumentsareperformance-basedbondswherebytheirfinancialorstructuralcharacteristics,suchasthecouponrate,areadjusteddependingonwhethertheissuerachieves
predefinedsustainabilityobjectives.Theobjectivesaremeasuredthroughkeyperformanceindicatorsand
assessedagainstsustainabilityperformancetargets.Failurebytheissuertomeetthosegoalsmayresultin
ahighercoupon.Thesebondscanalsobestructured
torewardbetter-than-expectedperformancewitha
lowercoupon.Unlikesocialorgreenbonds,proceedsarenotearmarkedforspecificprojects.InJune2020,ICMApublishedtheSustainability-LinkedBondPrinciples(lastupdatedinJune2023),providingguidelinesonstructuringfeatures,disclosure,andreporting.
Climatetransitionbonds:Thiscategoryofdebtaimstofinancethetransitiontoalow-carboneconomy.
TheClimateTransitionFinanceHandbookpublishedbyICMAinDecember2020(andlastupdatedinJune2023)recommendsdisclosuresforissuersmarkingeitheruse-of-proceedsorsustainability-linkedinstrumentswith
aclimatetransitionlabel.Therearefourkeyelements
totherecommendeddisclosures:theissuer'sclimate
transitionstrategyandgovernance;theenvironmentalimpactofitsbusinessmodel;theclimatetransition
strategythatmustbescience-basedandincludetargets;andthetransparencyofimplementation.
Otherlabels:Someissuershaveusedotherlabelsfor
sustainabledebtfunding,suchas“adaptation,”or“SDG”(SustainableDevelopmentGoals)bonds.Mostofthesespecifythatproceedsfromthebondmustalignwith
ICMAprinciplesbuttheirbrandinghasbeenadapted
tosingleoutaspecificfeature.Somebondslabeled
"sustainabledevelopmentbonds"departfromICMA
principles,astheyarenot"use-of-proceeds"bondsbutaregeneralpurposesecuritiesfromissuerswhowish
toflagthattheirmissionisinherentlysustainable.The
proliferationoflabelsrequiresvigilancefrominvestors
aroundprojecteligibility,allocation,andimpactreportingcommitments.
Page11
EmergingMarketGreenBondMarketPerformance
Theyear2023sawareboundinthemarketforsustainablefinanceindevelopingeconomiesanddebtissuancemoregenerally.Thesedevelopmentsbenefitedfromcalmer
financialmarketswithinvestorsanticipatingthatlowerinflationwouldsetthestageforcentralbankstostarteasinginterestrates(seeExhibit1).
INTRODUCTION
Thecomebackwasmorevigorousacrossemergingmarketswherepolicymakersinsomejurisdictionshadhiked
ratesearlierthandevelopedcountrypeersinresponsetoinflationarypressures.Asaresult,theyachievedsignificantprogressinbringingpricerisesundercontrol.5Inaddition,economicgrowthalsoprovedtobemoreresilientthan
expectedandrecessionwasavertedintheUnitedStatesandelsewhereleadingtocorporateearningsthatwereaheadofforecasts.
ExHIBIT1
FinancialMarketsStagedaRecoveryin2023
Totalreturnin2023versus2022
20222023
15.2%
10.9%
1.5%
4.9%4.2%
16.1%
-25%0%25%
Source:JPMorganWealthManagement
U.S.EquitiesWorldEquities60/40Portfolio
U.S.HighYield
USDCashU.S.Agg.BondsCommodities
-18.1%
-17.7%
-17.0%
24.5%
6%
-10.2%
-13.0%
-11.2%
21.
5InternationalMonetaryFund.2023."GlobalFinancialStabilityReport:FinancialandClimatePoliciesforaHigh-Interest-RateEra."Washington,DC,October.
Page12
However,secondarymarketperformanceofgreenbondsfromemergingmarketissuerslaggedconventionalbondsbyaround200basispointsin2023afterending2022
around450basispointsaheadonatotalreturnbasis(seeExhibit2).Greenbondstendtooutperformconventionalbondsinsecondarymarketsduringrisk-offperiods,andtounderperformwhenthemarketmoodismorepositive.Thisreflectsthehigherqualityoftheaveragegreenbond
issuer.Whilethisexplainsthedivergencebetweenthetwotypesofassetsinemergingmarkets,indevelopedmarkets,
however,theoppositewasobserved,likelyreflecting
thelongerdurationofgreenbondsinacontextof
changinginterestrates.Onaverageglobally,greenbondsunderperformedin2022onthebackofhigherrates,onlytooutperformin2023drivenbytheexpectationsoflowerratesdowntheroad.
ExHIBIT2
EmergingMarketGreenBondsMarginallyUnderperformedin2023DuetoStructuralFactors
Greenbondperformancein2022–2023
GlbalBonds
onn
25%
GreenBonds,10.7%
AllBonds,5.7%
0%
AllBonds,9.1%
GreenBonds,7.1%
-10.8%
-15.3%
-16.2%
-22.7%
-25%
EmergigMarketBods
Source:Bloomberg,IFC
Note:LeftpanelcomparestheBloombergMSCIGlobalGreenBondIndexUSDagainsttheBloombergGlobalAggregateBondIndexUSD;rightpanelcomparestheBloomberg
MSCIEMGreenBondIndexUSDagainsttheBloombergEMAggregateBondIndexUSD.Inbothcases,wecomputethedifferencebetweenannualgrowthratesoverend-of-yearlevelsineachindex.
Page13INTRODUCTION
Aclosely-watchedgaugeofmarketsentimentaroundsustainablefinanceisthegreenpremium,sometimes