Sustainable Debt Market
Summary H1 2023
August 2023

Key figures

GSS+ bonds captured by Climate Bonds• GSS+ debt crossed the
USD4tn mark. By theend of the first half of 2023
(H1 2023), Climate Bonds
Initiative (Climate Bonds)
had recorded cumulative
volume of USD4.2tn ofgreen, social, sustainability,transition, and sustainability
linked (GSS+) debt inalignment with its screening
methodologies (aligned).
• This figure included
USD448bn of aligned
GSS+ debt captured in
H1 2023 marking a 15%
year-on-year (YoY) decline
compared to H1 2022.
• Green bonds accounted for
62% of aligned volume,with USD278.8bn recordedin H1. This was followedby social and sustainability
debt contributing 15% and
14% respectively.
• February was the mostprolific month with totalaligned GSS+ volume of
USD81bn.
• EUR was the dominantcurrency of aligned GSS+
deals with 47% of the H1volume (USD210.9bn). This
was the sixth consecutive
year that EUR topped thecurrency chart.

Bonds meeting the requirements outlined
in Climate Bonds screening methodology
qualify for inclusion in the datasets and areclassified as aligned.

inclusion are classified as pending until
sufficient disclosure is available to decide.

Labelled bonds for which there is not enoughinformation to determine eligibility for database
AlignedBonds failing to meet the requirements of
Climate Bonds screening methodology areclassified as non-aligned and are excluded
from the datasets.
Pending

Non-aligned

Cumulative as of
30/6/2023

USD4.2tn

USD86.9bn

USD571.2bn

H1

USD448bn

USD53.8bn

USD105.2bn

Q2

USD220.7bn

USD36.0bn

USD67.2bn

Cumulative aligned GSS+ volume reached USD4.2tn in H1 2023
1200
1000
800
600

Green

SocialSLB

Sustainability
Transition

USD Billions

400
200
0
2019

2020

2021

2022

H12023
Source: Climate Bonds Initiative

Aligned GSS+ issuance reached USD448bn in H1 2023
500
400
300

Green issuance took a leap
forward in the first half.

200Green was the predominant theme in H1
2023, with 62% of the total aligned GSS+ debt
(USD278.8bn). Financial corporates contributed
the largest share of aligned green volumes with29% (USD79.6bn) including USD5.5bn from Intesa
San Paolo spread over five deals in GBP and EUR.

USD Billions

H1 at a glance

100
0
Green

SLB

SocialSustainability Transition

Total

Source: Climate Bonds Initiative

Sustainable Debt Market Summary H1 2023 Climate Bonds Initiative1

Non-financial corporates including Orsted (fourdeals worth EUR2.0bn/USD2.2bn), Mercedes (twobonds worth EUR2.0bn/USD2.2bn), and EDP (twodeals worth EUR1.75bn/USD1.9bn) contributed
to volumes of USD68.7bn from that segment of
the market (25%). Sovereigns was the third largest
issuer type, with nine countries contributing to its
total green volume of USD52.4bn (19%).

62% of aligned issuance was green in H1 2023
300

150

USD Billions

100
50
0
Green

EUR remains the preferredcurrency for aligned GSS+ deals

Deals originating from the USA contributed
32% to the USD volumes. While GSS+ issuancefrom the region did decline in H1 2023, overseas
issuers from 42 countries chose to price theirdeals in USD, including Supranational issuers(9%) and many from South Korea (8%).
CNY issuance dropped YoY from USD45bn to
USD36bn with most of the aligned volume
coming from green Use of Proceeds (UoP) deals.
Volumes may remain low going into H2 reflecting
a slowdown in China’s economy due to weakerglobal demand, ongoing real-estate crisis, andthe onshoring of global supply chains.1,2

Sustainability

SLB

Transition

H1 aligned volume from the USA declined in 2023
70
60

Green

50

Social

40

Sustainability

30
20
10
0
2019

2020

2021

2022

2023
Source: Climate Bonds Initiative

EUR takes at least 40% of aligned GSS+ volumes
1200

Green bond issuance overtakes
fossil fuel deals in H1 2023.

1000
800

Bloomberg reported that deals supporting
low-carbon energy amounted to more thanthose originating from fossil fuel companies in
H1 2023.3 Meanwhile, 58% (USD263.6bn) of thealigned volume recorded by Climate Bonds in H1
2023 was earmarked for renewable energy UoP.

EUR

CNY

USD

Other

600
400
USD Billions

A crucial decarbonisation lever for entities operating
in almost all sectors is access to low-carbon energy.
Electric vehicles, energy-efficient buildings, and evenproduction processes in the hard-to-abate sectors
such as steel and cement rely on access to low-carbon
energy as part of entity-level strategy to achieve netzero given their high energy needs and consumption.
Therefore, green deals with Low Carbon Energy
UoP overtaking those from fossil fuel companies isa significant milestone suggesting that financing tosupport clean energy expansion is being scaled.

SocialSource: Climate Bonds Initiative

USD Billions

EUR and USD accounted for 71% of the aligned
volume in H1 2023 (USD322.3bn). EUR remained
the preferred currency in the first half of 2023
with 47% of aligned GSS+ volumes (USD210.9bn).
Europe has the most advanced policy regulations
which motivate issuers to price transparent andambitious deals, while a quorum of investors withdedicated mandates makes the currency attractive
to issuers of GSS+ debt from around the globe.

2023

200

GSS+ bonds exhibit adecreasing US presence.
Aligned GSS+ volume originating from the UnitedStates fell sharply in H1 2023 to USD39.8 billion,
compared to USD65 billion in H1 2022. The antiESG political rhetoric in the United States may
have contributed to this 39% decline in volume.

2022

250

200
0

Sustainable Debt Market Summary H1 2023 Climate Bonds Initiative

2019

2020

2021

2022

H1 2023
Source: Climate Bonds Initiative2

Sovereigns were responsible for 18% of thealigned green volume (USD52.4bn). Germany
priced the largest volume of green sovereigns
with USD15bn spread over two new deals andthree reopenings. This was followed by Italy andthe United Kingdom with deals amounting to
USD13bn and USD9.8bn respectively. EUR was
the preferred currency for aligned sovereign
green bonds taking a 73% share (USD38bn).

SocialEurope dominated aligned social
issuance, accounting for 54% of thevolume in H1 2023. Half of the debt
was issued by government-backed entities while
financial corporates were the second largest
issuer type with USD10bn of aligned debt.
French social security provider Caissed’Amortissement de la Dette Sociale (CADES) wasagain the largest source of aligned social volume,
responsible for 30% of the H1 total (USD19.9bn).
The supply from CADES, with UoP earmarked for
Healthcare, Employment, and Social Equality,
was responsible for most of France’s USD23.6bn(35%) contribution to social issuance in H1,
the largest country source. South Korea andthe United States followed with USD8.9bn and
USD7.9bn, respectively. The second largest
social issuer, BNG Bank NV priced USD4.8bn
over four aligned bonds with UoP earmarked for
Healthcare, Affordable housing, Education and
Employment Generation.

USD Billions

40

Aligned Deals

600

30

450

20

300

10

150

0

0
Germany

China

USA

Italy

Aligned Deals

In H1 2023, Climate Bonds
recorded aligned volume bearing
the green label of USD278.8bn,
a slight decline of 4% vis-à-vis the USD290bn
recorded in H1 2022. Germany and China werethe largest sources of green bond volumes,
leading the market share with 14% (USD39.2bn)
and 13% (USD37.4bn) respectively. Despitea drop in total volume from China, issuancebearing the green label maintained its growth
making it the second largest source of green
volumes. March was the busiest month foraligned green volumes with USD51.2bn.

Germany was the most prolific source of aligned GSS+ deals in H1

USD Billions

Green

Supranational
Source: Climate Bonds Initiative

Ten largest issuers of aligned green bonds H1 2023
Issuer nameCountry

VolumeGermany

Germany

USD15.0bn

EIB

Supernational

USD13.2bn

Italy

Italy

USD13.0bn

United Kingdom

United Kingdom

USD9.8bn

KFW

Germany

USD7.3bn

European Union

Supernational

USD6.5bn

Austria

Austria

USD6.4bn

Intesa Sanpaolo SpA

Italy

USD5.6bn

Gaci First Investment Co PIF

Saudi Arabia

USD5.5bn

Bank of China

China

USD4.4bn

Ten largest issuers of aligned social bonds H1 2023
Issuer nameCountry

VolumeCADESFrance

USD19.9bn

5

BNG Bank NV

Netherlands

USD4.8bn

4

Korea Housing Finance Corp

South Korea

USD4.2bn

15

Chile

Chile

USD3.4bn

1

NWB

Netherlands

USD2.5bn

3Council of Europe Development Bank

Supernational

USD2.2bn

3Central American Bank for Economic Integration

Supernational

USD1.8bn

6Region Wallonne Belgium

Belgium

USD1.6bn

2

La Banque Postale Home Loan SFH SAFranceUSD1.4bn

1

UNEDIC ASSEO

FranceUSD1.1bn

1

Sustainable Debt Market Summary H1 2023 Climate Bonds Initiative

Alignedbonds

3

Spotlight: Social housing best practiceThe social bond label describes
bonds with UoP focused ondelivering positive social
outcomes. Better living
conditions for vulnerable groups
can contribute to improving their living
standards. Affordable Housing is among
the most frequently cited eligible project
categories in social and sustainability bonds.
Two examples of bonds priced in H1 2023
from Thailand and Peru are highlighted fortheir adherence to best practice.4,5 Firstly,
the eligible project categories are clearly
defined and include sufficient detail todetermine alignment with Climate Bonds
Social & Sustainability Bond Database
Methodology.6 Stated targets include detailsof the vulnerable populations who will benefit
from the expenditures. Secondly, the issuers
are the governments of EM countries with highincome inequalities and associated housing
challenges. Thirdly, the relatively large deal
sizes demonstrate the potential for projects
with prominent social benefit. Finally, theexpected environmental and social benefits
are clear, material, measurable, and the issuers
have committed to reporting on the impact of
the eligible expenditures in their allocation,
impact and post-issuance reports.

Issuer nameThailand governmentbondPeru government bond

ISIN

TH0623A3H605

PEP01000C5I0

Label

Sustainability

Sustainability

Issue date

31/03/2023

12/06/2023

Maturity date

17/06/2037

12/08/2033

Amount issued

THB105bn (USD2.8bn)

PEN9.185bn (USD2.5bn)

Social UoPHealthcare, Employment,
Education, Microfinance,
Food security, Affordable
housing, Equality,
Social AnR

Healthcare, Employment, Education,
Microfinance, Food security, Affordable
housing, Equality, Social AnR

Green UoP

Energy, Buildings,
Transport, Water,
Land use

Energy, Buildings, Transport, Water,
Waste, Land use, Industry, Green AnR

SDGs

SDG1, SDG2, SDG3, SDG4,
SDG6, SDG7, SDG8, SDG10,
SDG11, SDG14, SDG15

SDG1, SDG2, SDG3, SDG4, SDG5, SDG6,
SDG7, SDG8, SDG9, SDG10, SDG11,
SDG12, SDG13, SDG15

Social housing
project
description

The development and/or provision of affordable
and low-income housing.

Financing for the acquisition, repair,
expansion, improvement of social housing(via schemes such as capped rent/
rent control and other affordable home
schemes to support home ownership).

Targeted group

Those registered understate welfare earning
less than THB35,000 per
month (USD980).

The definition and identification ofvulnerable populations is conducted
through the Household Targeting
System (SISFOH). The SISFOH utilises
a combination of socioeconomic,
geographic, and intervention-specificcriteria to identify people, households
and groups in situations of poverty,
vulnerability or exclusion.

Impactindictors

Of people with accessto safe, affordable, andsustainable housing.

• Number of beneficiaries living in poverty.
• Number of beneficiaries living in
extreme poverty.
• Number of jobs created as
related to education, housing andhealth infrastructure.
• Number of homes built, disaggregatedby new or improved homes.

Sustainable Debt Market Summary H1 2023 Climate Bonds Initiative4

Sustainability

Ten largest issuers of aligned social bonds H1 2023

Sovereigns were responsible for 30%(USD19bn) of the sustainability bondvolume in H1, with YOY growth of 47%.
Development banks and non-financial corporates
recorded a decline of 56% and 27% respectively
in issuance volume as compared to H1 2022.

Issuer nameCountry

MexicoMexicoUSD5.1bn

4

IBRD

Supernational

USD5.0bn

2

ThailandThailand

USD2.8bn

1

Peru

Peru

USD2.5bn

1

Malaysia

Malaysia

USD2.2bn

1

NRW

Germany

USD2.1bn

1Government of Sharjah

UAE

USD2.0bn

2Banco Nacional de Obras Y Servicios(Banobras)

MexicoUSD1.9bn

2

Agence Francaise de Developpement

FranceUSD1.6bn

1

Nissan Motor Co Ltd

Japan

USD1.5bn

3

Mexico experienced exceptional YoY growth of
173%, with total aligned volume of USD8.2bn
originating from five issuers, 62% of whichcame from the sovereign. Aligned deals fromsupranationals decreased, falling to USD7bn from
USD26.4bn YoY.
The sustainability theme attracted three
newcomers into the aligned issuance league,
with United Arab Emirates, the Czech Republic,
and Cyprus issuing their debut sovereign
sustainability bonds for USD2bn, USD539mn,
and USD1.1bn respectively.

USD70.5bn of aligned sustainability
debt was priced in H1 2023

Development
Bank 18%

Sovereign
14%

NonFinancial
Corporate
18%

Financial
Corporate
18%

Local
Government
14%

GovernmentBacked Entity 9%

Transition

VolumeAlignedbonds

What is a transition bond?

Aligned bonds bearing thetransition label amounted to
USD772.6m in H1 2023, compared to USD2bn in
H1 2022. The overall issuer count dropped to 10
from 21 YoY, however, the issuer pool remained
the same with deals originating from China,
Japan, and EBRD (Supranational).
The USD772.6m came from six issuers from AsiaPacific and Supranational.
The lacklustre growth in deals bearing thetransition label is due to absence of clarity andestablished standards for the label, making its
application confusing for issuers. Clear policy
support in Japan and China in the hard-to-abate
sectors is contributing to the momentum oftransition bonds.

Climate Bonds regards
bonds bearing thetransition label as a
sub-set of green bonds
but records themseparately. Transition
bonds are UoP bonds mainly used tofinance sectoral or regional technology
roadmaps developed in hard-to-abate
sectors. A different label was developedin acknowledgment of the high GHG
emission of these sectors combined withthe transitional nature of the activities
being financed. However, when linked toa Paris-aligned roadmap, these bonds area subset of green bonds. The UoP must bealigned with a 1.5°C pathway.

Source: Climate Bonds Initiative

Issuers of transition bonds H1 2023
Issuer NameCountry

USD Million

Aligned bonds

Chugoku Electric Power Co Inc/The

Japan

143.34mn

1

EBRD

Supranational

96.96mn

1

Japan Airlines Co Ltd

Japan

140.98mn

1

Osaka Gas Co Ltd

Japan

252.04mn

3

Tohoku Electric Power Co Inc

Japan

110.08mn

2

Wuxi Huaguang Environment& Energy Group Co Ltd

China

29.22mn

1

Sustainable Debt Market Summary H1 2023 Climate Bonds Initiative

5

The sovereign GSS+ bonds club
Aligned sovereign GSS+
volume amounting to
USD74.8bn was recorded
by Climate Bonds in H1,
63% of which (USD47bn)
was priced in Q2. This was
the most prolific half year period for aligned
sovereign GSS+ debt so far, representing a
35% increase compared to the USD55.6bn
captured in H1 2022.
Twenty sovereigns issued aligned green, social,or sustainability bonds in H1, five of which issued
debut deals (Israel, India, Malaysia, UAE, andCyprus). By the end of H1, Climate Bonds had
captured aligned GSS+ deals from 49 sovereigns,
with cumulative volume of USD395.1bn
beginning with Poland’s debut green bond in
December 2017. Green is the label of choice forsovereigns, with 30 pricing a total of USD314.9bn,
followed by sustainability which has attracted
liabilities of USD53.8bn from 20 sovereign issuers.
Climate Bonds is looking for the fiftiethaligned sovereign issuer in the third quarteras governments act on the urgent need toaddress climate challenges. The process ofpricing a sovereign GSS+ deal was describedin Climate Bonds 2021 Sovereign Green, Social,and Sustainability Bond Survey research reportand once the commitment to issue has been
established, it typically takes nine months tobring the first deal to market.7

Aligned sovereign GSS+ debt
priced in Q2
Theme

USD bn

New Deals (Total USD33.9bn)
Austria

Green

4.9

CyprusSustainability

1.1

EcuadorSustainability

0.7

Germany

Green

10.7

Indonesia

Sustainability

0.1

Italy

Green

10.9

MexicoSustainability

2.9

Peru

Sustainability

2.5

Reopenings (Total USD13.2bn)
Chile

Social3.4

FranceGreen

2.9

Germany

Green

1.1

MexicoSustainability

2.1

UK

Green

3.7

Total

47.0

80% of cumulative aligned GSS+
sovereign volume is green
SLB 1%

Sustainability
14%
Social
6%

Green
80%

Source: Climate Bonds Initiative

Eight issuers priced aligned bonds in Q2, while
five reopened existing deals (including Germany
and Mexico who did both). Ecuador added an
innovative blue bond through an SPV to address
biodiversity through debt restructuring (seespotlight on page 7). The USD641m sinking
structure will be fully amortised in 2041.
Germany was responsible for the largest volumeof aligned sovereign GSS+ debt in Q2, pricing
EUR10.8bn (USD11.8bn) split between two newdeals and one tap, increasing its number of green
deals to seven. The first of the new deals was agreen Bund (10-year) priced in late April. Orders for
the EUR5.25bn (USD5.8bn) syndicated transaction
covered the deal size by 2.8 times. The second
deal was a EUR4.5bn (USD4.9bn) 30-year priced
in mid-June, and attracted an order book thatcovered the deal size by 6.4 times. Both followed
the twin bond structure, whereby a vanilla bond isissued, closely followed by a green bond sharing
similar characteristics. Even in a rising interest rateenvironment, each bond priced 0.5bps inside its
vanilla twin demonstrating enduring demand forthe green label. In early June, Germany also tappedits 2025 Bobl (5-year) for EUR1bn (USD1.1bn),
extending the size to EUR7.5bn (USD8bn).

Italy brought the largest single aligned
sovereign GSS+ deal in Q2, its third deal bearing
the green label. The EUR10bn (USD10.9bn)
8.5-year maturity, priced via syndicate in early
April. Interest in the deal reached EUR52.9bn,
enabling 2bps of spread compression. By
the end of Q2, Italy had issued cumulative
green bonds totalling EUR33.5bn (USD37.5bn)
amounting to 1.4% of its outstanding liabilities.
Following the publication of its sustainablefinancing framework in January 2023, Cyprus
was the only debut issuer of aligned sovereign
GSS+ debt in Q2, joining the market with its
EUR1bn (USD1.1bn) sustainability bond. The
deal attracted an order book of more than
12 times the deal size and achieved spreadcompression of 15bps. Proceeds from the deal
were earmarked for nine project categories,
consistent with the six environmental
objectives of the EU taxonomy, and sevencategories of social expenditures including
Food Security, Healthcare, and Equality.
Chile is the largest issuer of aligned sovereignsocial bonds and returned to the market in
April with a 2033 deal. The original size was
CLP300bn (USD381m) and attracted bids
covering the transaction more than eighttimes. Three subsequent taps brought theoutstanding volume to CLP2.65tn (USD3.4bn)by the end of Q2. The UoP was earmarked fora range of social project categories identified
in Chile’s 2020 updated sustainable financing
framework including Healthcare, Employment
and Training, and Food Security. Chile has
supported its climate and social rhetoricwith strong financial commitment and is the
only sovereign to have issued debt in four
sustainable themes.
Climate Bonds has recorded three issuers ofaligned social bonds: Chile (USD21.9bn), Ecuador(USD0.4bn), and Guatemala (USD0.5bn), andin 2022, no sovereign social deals were added
to the data set. As noted, twenty issuers havecombined social and environmental UoP
under the sustainability label.

Largest issuers of aligned sovereign GSS+ debt
Country

Theme

Total GSS+ priced
as of 30/06/2023% of total liabilities
as of 30/6/2023*

FranceGreen

61.7bn2.4%

Germany

Green

57.8bn3.0%

United Kingdom

Green453.5bn

1.4%

Chile

Green, social,sustainability, SLB

37.9bn

39.2%

Italy

Green

37.5bn1.4%

Sustainable Debt Market Summary H1 2023 Climate Bonds Initiative6

Debt-for-nature or debt-for-climate swaps
As the name suggests,
debt-for-nature or debtfor-climate swaps arefinancial agreements to
reduce the debt burdenof developing countries
in exchange for spending on conservation
efforts or climate action. Typically, thoseregions of the world most impacted by extreme
weather and threats to biodiversity residewithin countries struggling to service highlevels of debt. To ensure that debtor nations
do not cut back on expenditure designatedto protecting natural resources, a portion of acountry’s foreign currency debt is restructured,
diverting debt service payments to support
environmental projects and initiatives.
However, these instruments are
not without their critics. Despite theoverarching goal of promoting conservationand sustainable practices, the specificactivities and eligible project categories thatreceive funding are not always transparent.
Additionally, there is often insufficient clarity
on how the proceeds will be managed and thegovernance structures behind these deals. This
ambiguity makes it difficult to evaluate theclimate or environmental integrity of funded
projects when compared to investments that
follow a taxonomy approach and that holdstructured disclosure practices.
Climate Bonds screens green, social, andsustainable (GSS+) debt instruments toprovide transparency on global GSS+ debt,
ranging from individual deal-level analysis

Sustainabilitylinked bonds• In H1 2023, Climate Bonds
recorded total SLB volumes of
USD37.3bn across 102 deals.
• This represents a fall of 31.9% by volume and29.2% by deal count YoY.
• H1 2023 was the most promising half-year
yet for alignment with the recently published
Climate Bonds SLB Database Methodology,
with aligned SLBs reaching almost one
quarter (24.8%) of total issuance count, anda slightly higher percentage by issuancevolumes (27.2%).
• This is a marked increase in alignment versus
the preceding six months, which totalled
13.05% by issuance count.
• Further information about the SLB Database
Methodology can be found in the fulldocument, but in essence SLBs are organised
into the following four categories:

to identifying general market developments
and trends. Debt-for-nature swaps from the
Seychelles, Barbados, Belize, and Ecuador werescreened using Climate Bonds Green and Social &Sustainability Database Methodologies, which relyon publicly available information.8 The Ecuadoriandeal was priced in May 2023, when the country
swapped USD1.6 bn of its debt for a USD656m
loan by GPS Blue Financing, a special-purpose
vehicle that issued a Galapagos bond, channelling
funds to marine conservation. The USD656m,
sinking deal will be fully amortised by 2041 and islarger than the other three similar recorded deals
combined, which amounted to USD453m.
This illustrates how standardised public
disclosure is crucial for relevant stakeholders
to assess these instruments and to enable thecorrect classification of financed assets andexpenditures within social or environmental
categories. While the mentioned debt swaps
provided disclosure through press releases
and briefings, important components were still
missing, such as technical eligibility thresholds
and target populations. All the recent deals havebeen recorded in alignment with the sustainability
theme in Climate Bonds’ datasets because theydescribe both social and environmental UoP
categories. They were considered in alignment
with Climate Bonds’ Social and Sustainability(S&S) methodology as they posed no risk tominimum climate safeguards and offered somedisclosure regarding fund utilisation. However,
the increasing demand for transparency will drive
requirements for better disclosure of where theseinvestments are directed.

One way to enhance transparency
in debt-for-nature swaps is to adopt
frameworks and external reviews suchas those currently used in GSS+ bonds,
grounded in the International CapitalMarket Association (ICMA) Principles oftransparency, accountability, and reporting. The
establishment of such frameworks and external
reviews by independent bodies can verify thealignment of projects with predeterminedenvironmental and social criteria, or withcredible objectives through Key Performance
Indicators (KPIs) and Sustainability Performance
Targets (SPTs).9 Many recent debt-for-natureswaps target ocean conservation and blue
economy areas, and an additional source of
guidance is provided by the IFC Guidelines
for Blue Finance which details blue activities
outlined under ICMA Principles.10 However,rather than exercise disclosure through avariety of different sources involved in debt
swaps, establishing a unified document
detailing the use and management of proceeds,
such as a framework or an external review,
would allow easier analysis and evaluation.
Moreover, periodical reporting on disbursed
funds and project progress using frameworks
would facilitate comparability and technicalassessments. Adopting these practices would
provide assurance to stakeholders, including
investors and the public, that the funds werebeing utilised for impactful purposes.

H1 2023 was the most promising half-year yet for SLB alignment
Fully-aligned

100%Strongly-aligned

Aligning

Not Aligned

75%
50%
25%
0%
2018

2019

2020

2021

2022

H1 2023
Source: Climate Bonds Initiative• Fully aligned: SLB targets cover all material
sources of emissions, and are in-line with therelevant pathway.
• Strongly aligned: SLB targets cover allmaterial sources of emissions, and will be inline with the relevant pathway by 2030.

Sustainable Debt Market Summary H1 2023 Climate Bonds Initiative• Aligning: SLB targets cover all material
sources of emissions, are aligned with thepathway on a % reduction basis, and theissuer has the basic tenets of a transition plan.
• Not aligned: SLB targets fail to meet anyof the above criteria, and/or do not meetthe other requirements detailed in the SLB
Database Methodology.

7• Climate Bonds will be transitioning (excuse
the pun) its reporting on SLBs to include onlyaligned SLBs over the next six months, inline with the reporting on green, social, andsustainability bonds, while past reporting(including the numbers used in this report) has
included all tracked SLBs.
• The reasons for SLB non-alignment are
evolving and improving. While in the past thiswas due to a lack of GHG targets (just over halfof all SLBs in 2022), the main reasons in H1
2023 were partial emission coverage in targets(37.8%), lack of GHG targets (35.4%), followedby partial alignment with the pathway (9.8%).
• While SLBs are very much the younger siblings ofgreen bonds, and have had less time to mature,
the need for urgency is clear: fundamentally,
companies and governments need to developtransition plans and decarbonise rapidly toalign with 1.5°C pathways.

The reasons for SLB non-alignment are evolving and improving
Lack of footprint disclosure 1.2%

100%

Use of Economic Intensity Target 6.1%
Partially not in line with pathway 9.8%80%Partial emission coveragein targets 37.8%

60%

Not in line with pathway 3.7%40%Lack of target disclosure 6.1%

20%

Lack of GHG Targets 35.4%

0%
2018

2019

2020

2021

2022

H1 2023
Source: Climate Bonds Initiative

Based on this, Climate Bonds has a callto action for all stakeholders in the SLB
market: To get half of all SLB deals in 2023
in alignment!

Climate Bonds is ready to support all SLB issuers,
their underwriters, their investors, and SPO
providers, to achieve this target.

Case Study: Heathrow SLB
Thus far, we’ve seen many airports use the SLB
format to raise financing: nine airports across
15 deals totalling USD4.2bn, mainly tied to GHG
targets (73.3%). However, prior to Heathrow’sissuance, none had included emissions in theirtarget relating to the flights they enable.

Hallmark 1: Paris-aligned targets
Targets should be aligned witha sector specific, 1.5°C pathway;
cover the short-, mid-, and longterm; and include scope 1, 2, and3 emissions
As the first airport SLB to include emissions
relating to flights, Climate Bonds celebrates theuse of targets relating to all material sourcesof emissions for its sector, as well as the useof absolute emission reduction targets, rather
than an intensity-based emission target. While
Heathrow’s On the Ground target is in line with
SBTi’s ACA pathway, the In the Air target isused for alignment with the TPI 1.5°C Airlines
pathway, which requires a -39.6% reduction
between 2019 and 2030. Unfortunately, as aresult, this target and this bond, are categorised
as Not Aligned. Nonetheless, Heathrow’s
leadership in using these targets is to becommended, and other Airport SLB issuers arestrongly urged to include such targets.

Hallmark 2: Foundation
The company needs to have a
coherent narrative for the futurebusiness model and asset base,identifying changes from thestatus quo, and actions to achieve this vision.
Heathrow published its transition plan in
February 2022, which details a comprehensive
transition narrative for its future and how itplans to achieve net-zero. These plans centre
on changing processes and technologies, bothin the air and on the ground, shaping their own
behaviours as well as those of the airlines that
operate at Heathrow. Optimistically, it does
recognise the challenges it and the aviation
sector as a whole will face in decarbonisation,and details a Plan B, should Sustainable Aviation
Fuel (SAF) and plans for alternative fuel notcommercialise in time. However, this Plan B
unfortunately only contains the use of Carbon,
Capture, Use and Storage (CCUS) to remove
carbon from the atmosphere.

Hallmark 3: Implementation Action
Plans need to be 1.5°C-aligned, cover
all material sources of emissions, andinclude respective financing plans.
Transition Plans: Heathrow’s
transition plan is divided into two: In the Air and On
the Ground. The first plan is centred on optimising
airspace and operational efficiency, more efficientconventional aircraft, fuel-switching to SAF, andR&D to prepare infrastructure for zero-carbon
flights. The second plan is centred on switching
airside and landside vehicles to EVs or zero-carbon
vehicles, supply-chain engagement to decarbonise
its upstream suppliers, and changes to its buildings
and infrastructure. While it appears to be a best inclass action plan, there are still notable question
marks that remain, in particular about investments
in new SAF infrastructure that will prolong the life of
fossil fuel infrastructure, and its big bet on new, zerocarbon aircraft being ready for commercialisation
soon. Nonetheless, if Heathrow is capable ofdelivering on its commitments, Climate Bonds
will celebrate its emission reductions.
Financing Plans: Heathrow has dedicated£207m (USD265.4m) of capital to decarbonising

Sustainable Debt Market Summary H1 2023 Climate Bonds Initiativeits processes between 2022 and 2036. Thisis governed by the Carbon ProgrammeCommittee. Climate Bonds celebrates theuse of dedicated capex to decarbonise theairport’s business activities, but notes that thisis a fraction of the £3.5bn total capex Heathrow
dedicated to the same period.

Hallmark 4: GovernanceTransition needs to be driven,
owned, and monitored bysenior leadership, with ongoingrevaluation and recalibration.
Heathrow has clear and strong governancemechanisms to help drive its decarbonisation:
the Board’s dedicated subcommittee discusses
sustainability issues quarterly; the Carbon
and Sustainability delivery committee (whichgoverns the aforementioned Carbon ProgrammeCommittee) drives forward each department’s
sustainability plans; and two executives (Chiefof Staff and Carbon, Director of Carbon Strategy)
have decarbonisation in their direct remit.

Hallmark 5: Disclosure
Transition KPIs and underlying
methodologies need tobe disclosed, and receive
independent verification.
Heathrow discloses its figures andmethodologies for its GHG emission data,
including a detailed breakdown for sources ofemissions, and emissions from different typesof aircraft and operations. This is also assured
by an external third party. It also provides ahost of related environmental data, on areas
including biodiversity and its supply chains.

8Endnotes
1. https://www.bbc.com/news/business-66436582
2. https://www.businessinsider.com/companies-leaving-china-diversif
ying-supply-chains-apple-tsmc-mazda-2023-6
3. https://www.bloomberg.com/news/articles/2023-07-05/greenbonds-take-big-lead-over-fossil-fuel-debt-deals?cmpid=BBD070523_
GREENDAILY&utm_medium=email&utm_source=newsletter&utm_
term=230705&utm_campaign=greendaily&leadSource=uverify%20wall
4. Kingdom of Thailand, Sustainable Financing Framework, July 2020,
KOT Sustainable Financing Framework.pdf (pdmo.go.th)
5. Ministerio de Economia y Financias, Peru Sustainable Bond Framework,
July 2021, Peru_Sustainable_Bond_Framework.pdf (mef.gob.pe)
6. Climate Bonds Initiative Social & Sustainability Bond Database
Methodology, August 2022, CBI-Social-and-Sustainability-BondMethodology-14092022.pdf (climatebonds.net)
7. Harrison, C., and Muething, L., Sovereign Green, Social, andSustainability Bond Survey, Climate Bonds Initiative, January 2021

8. Climate Bonds keeps track of GSS+ debt through a combinationof three different databases: the Green Bond Database (GBDB); theSocial and Sustainability Bond Database (SSBDB); and the SLB andTransition Bond Database (SLBDB). Each database follows a specificscreening methodology, which are living documents that evolvewith the sustainable debt market. As of now, only the Green Bond
Database Methodology and the Social & Sustainability Bond Database
Methodology are publicly available. The SLBDB and associatedmethodology will be released in 2023.
9. The Green Bond Principles (GBP), Social Bond Principles (SBP),
Sustainability Bond Guidelines (SBG), Sustainability-Linked Bond
Principles (SLBP), and the Climate Transition Finance Handbook(together, “the Principles”) outline best practices when issuingbonds serving social and/or environmental purposes through global
guidelines and recommendations that promote transparency anddisclosure, thereby underpinning the integrity of the market.

10. The IFC Guidelines for Blue Finance aims to provide a list ofeligible use of proceeds to support private investments alignedwith the Green Bond Principles and Green Loan Principles andcontributing to Goals 6 and 14 of the United Nations Sustainable
Development Goals — “Ensure availability and sustainable
management of water and sanitation for all,” and “Conserve andsustainably use the oceans, seas and marine resources for sustainable
development.”

Climate Bonds Initiative © August 2023
Authors: Caroline Harrison, Neeraj Chouhan, Daniel Costa,
Matthew MacGeoch, and Xinru Xu
Editorial support: Stephanie Edghill
Design: Godfrey Design, Joel Milsted
www.climatebonds.net

Disclaimer: The information contained in this communication does not constitute investment advice in any form and the Climate Bonds Initiative is not an investment adviser. Any reference to a financial organisation or
debt instrument or investment product is for information purposes only. Links to external websites are for information purposes only. The Climate Bonds Initiative accepts no responsibility for content on external websites.
The Climate Bonds Initiative is not endorsing, recommending or advising on the financial merits or otherwise of any debt instrument or investment product and no information within this document should be taken as
such, nor should any information in this communication be relied upon in making any investment decision. Certification under the Climate Bond Standard only reflects the climate attributes of the use of proceeds of adesignated debt instrument. It does not reflect the credit worthiness of the designated debt instrument, nor its compliance with national or international laws. A decision to invest in anything is solely yours. The Climate
Bonds Initiative accepts no liability of any kind, for any investment an individual or organisation makes, nor for any investment made by third parties on behalf of an individual or organisation, based in whole or in part on
any information contained within this, or any other Climate Bonds Initiative public communication

Sustainable Debt Market Summary H1 2023 Climate Bonds Initiative

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