Labeled Bonds: Quarterly Market Overview Q1 2023

In our quarterly series dedicated to labeled bonds, we break down the latest issuance trends and the overall market by multiple bond and issuer characteristics to identify key developments in this rapidly growing and increasingly diverse market.

After several muted quarters, labeled-bond issuance rebounded strongly in the first quarter of 2023. These instruments provide investors with an opportunity to add exposure to issuers investing in various environmental and social projects in their portfolio, without markedly altering its credit characteristics. This is because, all else being equal, most labeled bonds’ carry very similar credit risk as conventional bonds from the same or closely comparable issuers. That also meant that while labeled bonds continued to differ significantly from conventional bonds of similar issuers in terms of their sustainability characteristics, their performance continued to be primarily driven by traditional fixed-income risk-and-return drivers.

Gross labeled-bond issuance and amount outstanding (last five years and year-to-date)

Data as of March 31, 2023. Source: Refinitiv, MSCI ESG Research.