Prepared by Climate Bonds Initiative. Sponsored by Citigroup, IFC and J.P. Morgan. Sustainable Debt Global State of the Market 2022 Climate Bonds Initiative SUSTAINABILITY LINKED TRANSITION GREEN SOCIAL SUSTAINABILITY SUSTAINABLE DEBT GLOBAL STATE OF THE MARKET 2022 1 1. Introduction About this report Contents 1. Introduction 2 2. Methodology 3 3. Report highlights 4 4. Green 7 5. Social and sustainability 12 6. Sustainability-linked bonds 17 7. Transition bonds 21 8. The Sovereign GSS+ Bond Club 22 9. Building resilience through sustainable finance 26 10. Outlook 29 11. Appendices 30 12. Endnotes 32 List of Acronyms A&R: Adaptation KPI: Key performance and resilience indicator ABS: Asset-backed LAC: Latin America and securities Caribbean AFFLU: Agriculture, METI: Japan’s Ministry forestry, food, and land use of Economy, Trade, and BILs: Bipartisan Industry Infrastructure Laws MDB: Multilateral CBS: Climate Bonds development bank Standard S&S: Social and CBS v4: Climate Bonds sustainability Standard V4 SME: Small and DM: Developed market medium-sized enterprise DRE: Distributed SSBDB: Social and renewable energy Sustainability Bond EM: Emerging market Database ESG: Environmental, SBT: Science-based social, and governance targets EU: European Union SBTi: Science Based FCA: Financial Conduct Targets initiative Authority SBP: ICMA’s Social Bond GBDB: Green Bond Principles Database SDG: Sustainable GBF: Global Biodiversity development goal Framework SLB: Sustainability- GBP: ICMA’s Green Bond linked bond Principles SLL: Sustainability- GHG: Greenhouse gas linked loan GSS: Green, social and SNAT: Supranational sustainability SPT: Sustainability GSS+: GSS, SLB, and performance target transition bonds TNFD: Taskforce on IIJA: Infrastructure and Nature-related Financial Investment Jobs Act Disclosures IPR: Inevitable Policy TPT: Transition Plan Response Taskforce IRA: Inflation UoP: Use of proceeds Reduction Act YOY: Year-on-year This is the 12th iteration of Climate Bonds Initiative’s (Climate Bonds) Global State of the Market Report. The scope of this report includes analysis of the green, social and sustainability (GSS) markets, plus sustainability-linked bonds (SLBs), and transition bonds. This report describes the shape and size of the GSS, SLB, and transition (collectively GSS+) debt market as of 31 December 2022. About the Climate Bonds Initiative Climate Bonds is an international organisation working to mobilise global capital for climate action. It promotes investment in projects and assets needed for a rapid transition to a lowcarbon, climate-resilient, and fair economy. The mission focus is to help drive down the cost of capital for large-scale climate and infrastructure projects and to support governments seeking increased capital markets investment to meet climate and greenhouse gas (GHG) emission reduction goals. Climate Bonds conducts market analysis and policy research; undertakes market development activities; advises governments and regulators; and administers a global green bond Standard and Certification scheme. Climate Bonds screens green finance instruments against its global Taxonomy to determine alignment, and shares information about the composition of this market with partners. The Climate Bonds team has also expanded its analysis to other thematic areas, such as social and sustainability bonds via the development of screening methodologies for investments that give rise to positive social impacts and added resilience. Certification against the Climate Bonds Standard (CBS) represents about 20% of global green bond market volumes. This scheme is underpinned by rigorous scientific Criteria to ensure that Certified bonds and issuers are consistent with the well-below 2˚C target of the Paris Agreement. Obtaining and maintaining Certification requires initial and ongoing thirdparty verification to ensure the assets meet the metrics of sector Criteria. Climate Bonds expands its Certification scheme to include corporate entities and SLBs Certification under the Climate Bonds Standard v4 (CBS v4) is expanding beyond Use-of-Proceeds (UoP) instruments to include non-financial corporate entities and their SLBs. Launched in April 2023, the CBS v4 is a major new development for Climate Bonds, which has driven credible climate financing for over a decade. Drawing from its experience in developing detailed sector Criteria for