ESG Bond Issuance Soars in 2024 Despite Fewer Issuing Companies
Last year witnessed a significant increase in the size of ESG (Environmental, Social, and Governance) bond issuance. However, paradoxically, the number of companies participating in these issuances actually decreased. These bonds, which fund eco-friendly and social projects, are becoming increasingly vital in the sustainability landscape. As we enter 2024, a recent report by Korea Credit Rating hints at both unprecedented growth and concerning trends in the domestic ESG bond market.
Growth in Issuance Size and Trends
According to the Korea Credit Rating’s 2024 domestic ESG bond issuance trend analysis, the total size of ESG bond issuance grew by 12.2% to 47.2 trillion won this year. This marked an increase from 42 trillion won in 2023. Breaking it down, green bond issuance hit 8.3 trillion won, and social bonds were 36.5 trillion won, rising by 11.5% and 16.5% respectively. However, sustainable bonds decreased by 26.8% to 2.4 trillion won.
Participants in ESG Bond Market
The report further details that 49.7% of this issuance came from financial companies, followed by securitization special purpose corporations (SPC) at 10.8%, and 6.7% from general companies. This data, while suggesting robust expansion, also indicates a worrying decline in participant numbers. The number of ESG bond issuers has been decreasing, with figures dropping from a peak of 154 in 2021 to just 91 last year.
The Impact of Large-Scale Projects
The increase in the size of ESG bonds can be attributed primarily to projects revolving around pollution-free vehicles, secondary batteries, and renewable energy investments. However, the quality of these bonds has been called into question by industry experts. “The strength of ESG bonds lies in measuring future growth and fund diversification, but their quality continues to decline,” stated a representative from Hanshinpyeong.
Challenges Ahead
An even more notable trend is the reduction in green bond issuers among general companies, dropping from 36 in 2021 to just seven in 2024. Companies linked to the electric vehicle and secondary battery sectors, which have been driving the market, are expected to pull out of ESG bond issuance in 2025. This withdrawal comes at a crucial time as domestic companies face escalating pressure to meet national carbon neutral goals and the RE100 agenda of achieving 100% renewable energy use.
Future Expenditure on Renewable Energy
To stay ahead of these challenges, industry experts have urged increased investment in new and renewable energy. This investment is vital for meeting the rising demands related to sustainability and climate targets. As a result, companies are being encouraged to realign their strategies to foster long-term sustainability and resilience.
The future of ESG bond issuance lies not only in growth but in achieving sustainability. As the market evolves, stakeholders must proactively address concerns surrounding the quality and diversity of investments to ensure lasting benefits.
