SEB’s The Green Bond report: stall warning

In the latest issue of SEB’s The Green Bond report, our experts highlight the challenges facing the transition to a zero-emission economy. After surging in the first part of the decade, both clean energy investment and sustainable finance transactions are levelling off. This reflects the lack of coordination between the many interconnected elements of the transition. More policy support is likely required to restart the engines. 
 
“2023 has highlighted the challenges that still hold the transition back,” says Thomas Thygesen, Head of Strategy and Sustainability in SEB Equity Research. “Clean energy investment and electric vehicle diffusion appear to be levelling off, and the political leadership triggered by the 2022 energy crisis is flagging, especially in Europe.” 

This is essentially a coordination problem, according to Thygesen. “The many different technologies that must come together in an accelerated transition are not moving forward at the same pace. This is a problem the market cannot fix on its own. More policy support is needed to get the locomotive back on the tracks,” he says.

The report also features an update on the sustainable finance market. Green, social, sustainability, and sustainability-linked bond and loan transactions have exceeded USD 1.1 trillion so far this year. While sustainable bank lending lags previous records, green bonds continue to grow – there has been more than USD 570 billion in new issuance in 2023. The USD 15 billion transition bond market remains a niche, but may benefit from increased clarity on expectations from regulators like the EU for science-based approach to transition financing.

The next climate summit, COP28 in Dubai, starts already next week, and the pressure is on the sustainable finance market to show that it can enable industries and governments in transitioning to net-zero. 

“Sustainable debt financing in emerging economies and least developed countries has seen remarkable growth passing cumulative USD 800 billion in the past ten years,” says Gregor Vulturius, Lead Scientist and Advisor at Climate & Sustainable Finance at SEB. “but more efforts are needed to scale market-based an concessional sustainable finance to places where it’s needed the most.”

This edition of The Green Bond report focuses on transition finance with contributions by the Swedish Export Credit Corporation SEK and Norwegian offshore wind installation company IWS in their role of transition enablers. The report also includes a presentation from Vasakronan on how they tackle the transition of their real estate portfolio, SEB’s Senior Sustainability Specialist Anna Douglas also speak about the role of hydrogen in the energy transition, and SEB’s regulatory experts discuss the EU Transition Finance Package. Lastly, the report also includes a presentation by S&P on the complicated nexus of energy transition minerals and biodiversity. 

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

For more information, contact:
Lina Apsheva, Climate & Sustainable Finance
+46 70 767 6527
lina.apsheva@seb.se

Press contact:
Niklas Magnusson, Head of Media Relations & External Communication
+46 70 763 8243
niklas.x.magnusson@seb.se

SEB is a leading northern European financial services group with international reach. We exist to positively shape the future with responsible advice and capital, today and for generations to come. By partnering with our customers, we want to be a leading catalyst in the transition to a more sustainable world. In Sweden and the Baltic countries, SEB offers financial advice and a wide range of financial services. In Denmark, Finland, Norway, Germany and the United Kingdom, we have a strong focus on corporate and investment banking based on a full-service offering to corporate and institutional clients. The international nature of SEB's business is reflected in our presence in more than 20 countries worldwide, with around 17,500 employees. At 30 September 2023, the Group's total assets amounted to SEK 4,134 bn while assets under management totalled SEK 2,194bn. Read more about SEB at sebgroup.com.