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While down compared with last year, global sustainable bond issuance is holding up better than the rest of the market, Moody’s Investors Service reports.

The rating agency lowered its forecast for sustainable bond activity this year to US$900 billion from US$1 trillion, citing the weaker financial market climate.

In the third quarter, global issuance of green, social and sustainable bonds came in at US$215 billion, down by 13% year over year, and down by 10% from the previous quarter.

To Sept. 30, sustainable issuance was down by 17% year over year, but overall issuance had dropped more sharply, down by 27% over the same period, Moody’s said.

And, with sustainable bonds gaining market share within the overall bond market, Moody’s said, “the fundamental drivers of sustainable bonds’ long-term growth remain in place and we expect issuance growth to resume when market conditions become more favourable.”

In particular, the report said a significant increase in financing is needed to enable an equitable transition to a low-carbon economy in the years ahead.

“Sovereign governments, particularly those in emerging markets, are at the forefront of financing initiatives that can support sustainable development while ensuring a just transition,” Moody’s noted.

Additionally, the report said a fast-evolving climate policy landscape “will influence trajectory of sustainable bond market.”

Among other things, it pointed to the U.K. Financial Conduct Authority’s latest proposals to address greenwashing, new U.S. climate legislation, and ongoing efforts from European policymakers to drive green investment.

“Beyond the continued growth and diversification of sustainable bonds, there are many policy, regulatory and market-driven developments with implications for volume,” it said.