Total green bonds, loans dropped in 2022

MANILA  -The annual volume of green financing made through bonds and loans across the world, but especially in Southeast Asia, dropped for the first time in 2022 after rapid growth in the previous five years.

According to the Asia Transition Finance Study Group (ATF SG), financing for the transition toward carbon neutral production activities fell by 10 percent globally to $1.32 trillion in 2022 from $1.47 trillion in 2021.

Before that, sustainable financing has been surging yearly from $140 billion in 2017.

In Southeast Asia alone, transition financing dropped by 33 percent to $34 billion last year from $50 billion the year before.

The massive drop followed an uptrend from just $1 billion six years ago.

The ATF SG, a private group formed in 2021 and led by financial institutions that are mainly Asian and global banks—including Philippine-based Security Bank Corp. and BDO Unibank Inc.—saw two potential explanations for the downturn.

“First, the 2022 global bond market environment, marked by higher interest rates, inflation, an energy crisis, an unpredictable 2023, and overall volatility, weighed on funding decisions, making primary markets harder to navigate,” the Study Group said in their 54-page 2023 annual report.

“Another reason for the decline of the sustainable finance market may be the tightening of regulations in North America and Europe in 2022, making borrowers more cautious,” the group added.

Further, ATF SG said the decrease in green financing happened when the need for capital to accelerate the shift to net carbon neutrality has become heightened, considering that the world is experiencing the impact of climate change. INQ