"The clean energy transition is showing no signs of a break with the past year's stagnating trend," says Thomas Thygesen, Head of Strategy and Sustainability in SEB Equity Research. "China has been propelling global growth, but now appears to be slowing from a high level. In the rest of the world, we are starting to see the effect of new industrial policies like the IRA in the U.S. Europe must find a response, which is challenging given the fragmented political landscape." 

"The new industrial policies are designed to achieve both domestic policy objectives and accelerate the decline in emissions," says Thomas Thygesen. "The IRA anchors the transition with voters by lifting capex and creating jobs, often In areas that had been dependent on the fossil industry. In contrast, Europe's policy framework makes the transition more expensive for ordinary people, risking a political backlash."

The report also features an update on the sustainable finance market. The first three months of 2024 saw timid growth in use-of-proceeds bonds, with the weak development primarily due to a year-on-year decline of about 50 percent in sustainability-linked bond issuances. However, cover ratios for sustainable bonds remain above the market average, which indicates that there is lasting investor interest in sustainable finance. 

"The share of sustainable bonds of the global and European bond market reached its highest level ever for a first quarter, at of 3.5 per cent and 6.7 per cent respectively," says Gregor Vulturius, Lead Scientist and Advisor at Climate & Sustainable Finance at SEB. "Green bonds offer some respite in a stagnating sustainable finance market, growing by 30 per cent year-on-year in Europe and by 15 per cent in North America. However, to truly push the energy transition forward, the sustainable debt market needs a second push. That could come from new regulation that lowers the risk for borrowers and lenders."

The report also contains contributions from asset manager Brookfield on its role as a future clean energy supermajor and from Finnish start-up Coolbrook on its novel solution to decarbonize industrial heat. In addition, The International Labour Organization shares its insights on how to finance a just transition.

About The Green Bond report
SEB, which together with the World Bank developed the green bond concept in 2007/2008, publishes the research publication The Green Bond 5-6 times a year. It strives to bring readers the latest insight into the world of sustainable finance through various themes. Even though the report covers all kinds of products and developments in the sustainable finance market, we have decided to keep its historic name - The Green Bond - as a tribute to our role as a pioneer of the green bond market. You can find The Green Bond report at sebgroup.com.