ESG fund flows have picked up, amid easier financial conditions and growing demand. Global climate flows surpassed $1.1 billion in 2022 - up over 25% from $870 billion in 2021. On average, ESG stocks and bonds are up by some 5% in 2023 ytd. Global sustainable/ESG debt issuance was down over 15% to $1.3 trillion in 2022, from $1.5 trillion in 2021. We project global ESG debt issuance to climb to $1.7 trillion in 2023 and near $2 trillion in 2024.

Progress by the Integrity Council for the Voluntary Carbon Market (IC-VCM) and the release of the Core Carbon Principles (CCPs) will help address ongoing concerns about voluntary carbon credit quality—a must to support market expansion; Greater price transparency will also help: in this first edition of our new Voluntary Carbon Markets Monitor, we introduce a registry transparency index to assess disclosure of the registries that track and validate the quality of carbon credit projects.

The ESG debt universe is fast approaching the $5 trillion mark, up from $3.4 trillion in 2021. While rising global rates weighed on total issuance in 2022, issuance in emerging markets remained strong, reaching an all-time high of $260 billion—mostly driven by China.

A commitment to net-zero requires financial firms to transform themselves and manage down their risks—in so doing, they drive real-world change by engaging with customers and markets, and ultimately enabling entire economies to transition to a low-carbon future. This unique position in the global economy makes it incumbent on financial firms to design credible decarbonization strategies, with everything that entails.

ESG backlash will continue to be a headwind for market development, but there are many reasons for optimism...

At COP15, almost 200 countries reached an agreement to halt and reverse biodiversity loss by 2030 and achieve recovery and restoration by 2050. The deal should speed adoption of the Taskforce on Nature-related Financial Disclosures (TNFD) framework to assess and disclose nature-related risks and opportunities, while accelerating development of nature-positive financial markets.

Amid fears of global recession and USD strength, prices for energy transition metals have subsided in 2022… although transition planning and sustained expansion in renewable energy capacity will underpin demand.

Climate finance flows are on track to reach a fresh high of $915 billion in 2022; Sustained policy support—amid heightened concerns over energy security—should accelerate the expansion in renewable energy capacity, while increasing energy-efficiency related investment.

We are pleased to share the latest edition of our new quarterly chartbook, designed to monitor sustainable flows (to ESG funds, climate finance flows, and climate finance to emerging markets), ESG market development, the electric vehicle industry, and the evolution of the voluntary carbon market.  The chartbook also includes our regular ESG Country Scorecard—a useful indicator of progress in areas including carbon efficiency as well as broader environmental and social issues in emerging and frontier markets. We welcome your comments!