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Increasing Awareness of Environmental and Social Issues has led to a Growing Demand for Sustainable Finance Market

Global Sustainable Finance Market Reached Valuation of US$ 4954 Bn in 2022, Anticipated to Gain CAGR of 20.1% over 2023 – 2031; says AMI

Global Sustainable Finance Market Introduction

Sustainable finance is the process of incorporating environmental, social, and governance (ESG) factors into financial investment choices, resulting in investments that last longer in sustainable economic activities and projects. Climate change mitigation and adaptation, as well as environmental issues in general, such as preserving biodiversity, pollution avoidance, and the circular economy, might be considered.

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As sustainable finance products become more frequently utilised, transaction volumes will rise, as will the variety and originality of real-world applications of proceeds, projects, and sustainability-related KPIs that may be used to validate the applicable ESG label. This might be especially true for multinational firms, financial institutions, and other organisations with international activities. Nonetheless, the trend is apparent, and the rate of expansion in the sustainable finance sector does not appear to be slowing anytime soon. In this fast-paced environment, which is exacerbated by very real social and economic pressures to provide financial support to markets and industries that have been hit by, and continue to be hit by, the economic fallout of the COVID-19 pandemic, the war in Ukraine, and the resulting energy security concerns, it will be critical for financial institutions, prospective issuers, and borrowers to stay current on the component parts of the evolving sustainable finance ecosystem.  

Global Sustainable Finance Market Key Takeaways

Sustainability-linked derivatives, as well as green and social securitizations and other more exotic structured products, are on the increase. Furthermore, a slew of regulatory and industry-driven initiatives aimed at financial transactions and institutions are being launched, slowly implemented, and are set to go live in the next years. With the emergence of sustainable investing, there is a greater demand for derivatives with environmental, social, and governance (ESG) goals. Despite their infancy, these products, known as sustainability-linked derivatives (SLDs), have an opportunity to contribute to the green transition. Recently ISDA published a survey in April 2022 to review the present level of SLD documentation. ISDA members and non-members were both invited to participate in the poll and sixty-nine respondents said they had SLD transactions.

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The European Union has put up a significant rise in legislative and regulatory actions in the last five years to integrate finance with sustainability and address the climate catastrophe. The EU  frequently tries to be in the forefront of worldwide efforts to tackle climate change and to establish a financial system capable of supporting and promoting long-term prosperity. According to the European Union, whose Green Deal Investment Plan seeks to gather $1.14 trillion to help pay for Europe's net zero climate change emissions by 2050, sustainable finance may assist the globe move to net zero emissions by directing private money into carbon-neutral initiatives. The International Financial Reporting Standards Foundation has created the International Sustainability Standards Board to develop new rules for assessing sustainability claims in order to ensure that environmentally friendly investments deliver on their promises. Thus in the upcoming years, the sustainable financing market will flourish in Europe with the supporting legislatives and policy reforms.

Asia Pacific region is anticipated to be the fastest growing in the sustainable finance market during the forecast period. In 2021, developing nations' proportion of global bond issuance has increased, marking the first time that these economies gained market share at the cost of mature economies. Asia and the Western Hemisphere have witnessed the most interest, notably in sustainability-linked bond and loan products. This dramatic acceleration has occurred as a result of regulators and stock exchanges mainstreaming sustainable finance techniques in these nations. Pandemic-induced demand and green financing practices have fueled it. Some emerging markets have taken the lead in enacting climate-related disclosure rules and developing taxonomies which will support the growth of the sustainable finance market.

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Global Sustainable Finance Market Key Competitors

  • BNP Paribas
  • Boston Consulting Group
  • Deloitte Touche Tohmatsu Limited
  • Deutsche Bank AG
  • EcoVadis
  • Goldman Sachs
  • KPMG
  • PwC
  • Refinitiv Limited
  • South Pole
  • The Hongkong and Shanghai Banking Corporation Limited (HSBC)
  • The Royal Bank of Scotland International Limited
  • YES BANK
  • Other Market Participants

Global Sustainable Finance Market

By Transaction Type

  • Green Bond
  • Social Bond
  • Sustainability Bonds
  • Sustainability Linked Bonds

By Industry Verticals

  • Automotive
  • Manufacturing
  • IT and Telecommunication
  • Banking, Financial Services and Insurance
  • Healthcare
  • E-commerce
  • Government
  • Energy and Utilities
  • Aerospace
  • Defense
  • Logistics and Transportation
  • Others

By Region

  • North America (U.S., Canada, Mexico, Rest of North America)
  • Europe (France, The UK, Spain, Germany, Italy, Nordic Countries (Denmark, Finland, Iceland, Sweden, Norway), Benelux Union (Belgium, The Netherlands, Luxembourg), Rest of Europe)
  • Asia Pacific (China, Japan, India, New Zealand, Australia, South Korea, Southeast Asia (Indonesia, Thailand, Malaysia, Singapore, Rest of Southeast Asia), Rest of Asia Pacific)
  • Middle East & Africa (Saudi Arabia, UAE, Egypt, Kuwait, South Africa, Rest of Middle East & Africa)
  • Latin America (Brazil, Argentina, Rest of Latin America)  

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