The SLB market shows a complementary issuance profile to green bonds. SLBs are used by a broad range of sectors, including hard-to-transition industries which find it hard to attract more traditional ‘green’ capital but are essential for transition.
SLBs are used more by lower rated issuers including high-yield companies. SLBs are particularly popular in emerging markets, increasingly for sovereigns, where there are challenges in having sufficient eligible projects for green issuance.
There has been speculation that the recent drop in SLB issuance is related to the criticism of climate impact of SLBs issued to date.
Our analysis highlights that before drawing conclusions on SLB issuance patterns, observers should consider the different characteristics of the issuer base, and the advantages of enabling a wider range of issuers and sectors to transition.