ING’s Sustainable Finance Pulse - issue 5

In this issue:

• Global market growth in 2024
• Deal highlight: A.P. Moller-Maersk
• Healthy growth for ING & global markets
• Blue waters, green vessels: ING aims to be a catalyst for shipping decarbonization
• ING Research: Shipping Outlook

Sustainable finance market update

Sustainable finance issuance certainly saw some growth in 2024, with Global issuance reaching US$1.657tr. This matches the volumes of 2022 and is an increase on 2023’s US$1.488tr. This was mostly driven by the record breaking Q1 issuance and very decent Q3 issuance, and despite a slightly lower Q2 and Q4 levels. We expect sustainable issuance will continue the growth path in 2025, likely ending the year slightly below the significant 2021 levels. Climate mitigation remains a primary focus, and the countdown to 2030 decarbonisation targets will drive investments in clean energy. Improved regulation and standardisation, as well as a bit more comfort regarding the ambition of sustainable targets, will also assist in issuance growth. The new European Green Bond Standard will likely act as a catalyst for more issuance.

At the same time, we see some headwinds too, namely the changing political nature in the U.S and less so Europe. The negative impact on sustainable issuance is not expected to be too drastic but it could pose a slight dampener on growth. We don’t expect the Trump administration loosening constraints to have a drastic effect on issuance, it may result in slightly lower growth in the USD market. Many states, local agencies, corporates and financial institutions have their own sustainable targets that they will likely stick to.

In addition, much of Asia, the UK and many EM segments are still very active and looking to grow efforts in transition. Already in 2024, we have seen many transition bonds and loans coming out of Asia. This is certainly going to be a growth segment in the coming years and will become more mainstream. Green bonds remains the largest portion of sustainable finance, with a record-breaking US$688bn in 2024. We expect this could reach US$700bn in 2025, for another record-breaking year. Sustainability linked loans account for a significant US$278bn of total issuance in 2024. This is still drastically lower than the large levels seen in 2021 and 2022. Where we continue to expect some growth in 2025, it is expected to still largely fall short of 2021 & 2022. Growth is driven by refinancing many deals closed in 2021/22, more interest across a broader range of geographies and better ESG data available. Sustainability linked bond issuance was rather slow in 2024, pencilling in only US$39bn, lower than even 2023. The SLB market could rebound slightly but we expect will still be lower levels than previous years. Sustainability bonds and Green loans both mark record breaking levels in 2024 with US$252bn and US$192bn respectively, seeing steady growth in the products is expected in 2025 driven by transition commitments.
 

Deal highlight: A.P. Moller-Maersk

ING acted as Mandated Lead Arranger for the financing of six 17,000 TEU container vessels currently on order at Hyundai Heavy Industries (HHI), Korea. On delivery in 2025, the vessels will be capable of operating on green methanol and are expected to achieve savings of about 800,000 tonnes of CO2 emissions annually.

Want to know more about our Shipping sector? Contact Stephen.Fewster@ing.com.

Healthy growth for ING & global markets

Data from Bloomberg New Energy Finance suggests that the global sustainable finance market returned to healthy growth in 2024 after a muted 2023, increasing by 11%. The year got off to a solid start with a record breaking 1Q, and later a strong third quarter, while 2Q and 4Q showed a mixed picture.

By tapping into our global network and local expertise, ING mobilised €130 billion of sustainable financing* in 2024, outperforming market growth and showing strong progress against our 2027 target of €150 billion per annum.

ING also saw a robust Q424 in terms of transaction numbers and volumes, mobilising sustainable financing of €45.7 bn, reflecting a ca 9% increase compared to the same period last year. This adds to a positive 2024 position for ING, with sustainable volume mobilised of €130bn,  13% ahead of the previous year.  We saw the increase in volume mobilised driven by sustainability-linked loans and green loans. In addition to volumes from loans and bonds, we’ve also seen greater sustainable finance volumes in 2024 relating to commercial paper and guarantees, demonstrating our engagement with clients across a wider range of sustainable finance products.

While most of ING’s sustainable finance activities continued to come from EMEA in 2024 (63%), we have seen strong year-on-year growth across all regions including APAC and Americas. A slower start in volumes for US at the beginning of the year, but strong growth in volume mobilised from Americas and APAC for 2024 overall, driven by sustainability-linked and green loans.

Global head of the Sustainable Solutions Group, Jacomijn Vels, says that there’s reason for both optimism and caution for 2025:

The beginning of this new year shows signs that the sustainable finance market is off to another positive start. But at the same time, the uncertainty around the impact of President Trump’s policies on environmental, social and governance (ESG) initiatives in the US is reason for concern. The administration has already halted funding for green infrastructure worth $300 billion. Without further government subsidies, we’ll likely see heightened scrutiny from investors and as a result, more focus on the commercial viability of green or clean tech projects. That said, in the renewables and digital infrastructure spaces in particular, the need for green financings will likely continue. There’s momentum behind the Inflation Reduction Act, with many projects already underway, and if it makes economic sense to invest in these projects, then this should provide enough incentive to keep up a solid level of financing.

A focus for ING in 2024 was on developing our approach and methodology for assessing our clients on the information they disclose about their climate transition plans, and specifically how that translates to what we call our Client Transition Plan (CTP) score, and how we embed that into the decision-making of the bank.  Jacomijn says:

Having first assessed the CTPs, the next step is to monitor progress. We want to engage with clients throughout, while also engaging with those that are non-aligned, and encouraging them to transition with us. During the year, we have engaged with more than 1,600 of our Wholesale Banking clients on their transition plans.

Details of what counts towards our sustainable volume mobilised can be found here.

Blue waters, green vessels: ING aims to be a catalyst for shipping decarbonization

Shipping is vital to the global economy, with over 80% of traded goods transported by ships. ING finances top-tier international ship owners, aiming to drive sustainability by engaging clients, financing their transition to net zero, and collaborating with stakeholders. The International Maritime Organisation (IMO) targets net zero emissions by 2050, with intermediate checkpoints in 2030 and 2040. The Poseidon Principles align with IMO's targets, and ING's portfolio was the 3rd most aligned in the 2024 disclosure report.

Stephen Fewster, global head of Shipping, emphasizes targeting top-tier ship owners based on various factors, including operational efficiency. Emission reduction can be achieved through technical measures, operational measures, and low or zero-carbon alternative fuels. ING supports these efforts by financing retrofits and alternative fuel capabilities, recognizing the importance of scaling up alternative fuels.

ING participates in industry efforts like the Silk Alliance to aggregate demand for green fuels. Regulations and geopolitical events will continue to impact the industry, while consumer demand for lower carbon footprints will push container shipping to decarbonize faster. ING's "Net Zero Advocacy project" aims to support clients in retrofitting vessels and investing in dual-fuel vessels, shaping the future fuel mix of the shipping industry. Read more here.

ING Research highlight, Shipping Outlook 2025: Riding the Waves of Geopolitics

The shipping outlook for 2025 is heavily influenced by geopolitics, with wars and political tensions altering trade patterns. New US import tariffs could limit trade growth, potentially leading to a mild reduction in 2026. The tanker shipping segment is most affected by geopolitics, but bulker and container shipping are also impacted. Capacity constraints and higher freight rates generally benefit these segments.

Global trade growth is expected to be 2.5% in 2025, but a contraction may occur in 2026 due to tariffs. Seaborne tonnage development varies, with coal declining and LNG volumes increasing. Container trade is expected to grow by around 3%. The full resumption of the Red Sea and Suez route is a key uncertainty, potentially changing shipping dynamics and causing overcapacity in container shipping, leading to lower spot freight rates.

Tanker shipping is expected to have a solid year with mild growth in global oil and refined products demand. LNG demand is also expected to grow strongly, though the market may be weighed down by earlier ordered LNG carriers. The bulker shipping order book is more manageable, but 2025 dry bulk trade growth is expected to drop below new tonnage coming online. China's reduced demand for steel and tempered manufacturing activity impact iron ore demand, while the energy transition affects global coal demand.

Overall, 2025 poses significant uncertainty for shipping. Container shipping may be less prosperous than in 2024, while bulker shipping faces more challenges. Tanker shipping conditions remain strong. CO2 emissions in shipping have increased due to rerouting and inefficiencies, with the sector not yet on track for its CO2 targets despite fuel efficiency gains and alternative fuels. Read more on ING THINK.