Foreign reserves continued to recover in 2021, supported by factors including SDR allocation, high commodity prices, and exchange rate adjustment. Brazil, Mexico, Chile, and Peru beefed up external buffers. Yet challenging current account and capital flows dynamics could pressure reserves in 2022.

The Nord Stream 2 pipeline is expected to enter into service in 2022H2. Several rounds of U.S. sanctions have delayed but not stopped the project. And the administration is attempting to mend fences with European allies. But additional measures are likely in case of a Russian invasion of Ukraine. For Europe, sanctions related to natural gas imports are highly problematic. However, a Russian escalation of the Ukraine conflict would force hands. German authorities are considering "all possible measures" against NS2.

Investors poured over $580 billion into ESG funds in 2021-up from $320 billion in 2020; Sustainable debt issuance nearly doubled to more than $1.4 trillion in 2021, vs. $720 billion in 2020; Strong demand for voluntary carbon offsets has brought total offset issuance to over 350 MtCO2e.

Investor sentiment towards the GCC region will improve further due to higher oil prices. Government-Related Entities (GREs) and the financial sector are expected to slightly increase their debt issuance. The pace of ESG issuance is accelerating.

The January U.S. Regulatory Update covers Fed announcements on digital assets oversight, climate-related financial risk updates, new regulatory proposals, and more.

As pandemic strains eased, EM sovereign Eurobond issuance subsided to pre-COVID levels in 2021 ($145 billion), with Chile, Mexico, and UAE the top issuers. With global rates set to rise in 2022, and still-high funding needs, EM sovereign issuance is expected to remain broadly stable at $150-$160 billion this year.

Beijing took a series of bold regulatory and economic policies in 2021. Though good for long-term sustainability, the intensity of these policies is hurting near-term growth. Better communication and some policy easing can relieve the near-term pains.

Appropriate regulation of stablecoins will continue to present challenges as these assets become more sophisticated and widely adopted.

2021 was a tumultuous year for China’s economy, which was disrupted by the housing slump, energy shortage, and regulatory storms. We expect policies will be significantly more pro-growth in 2022.

The December 2021 edition of the Insurance Update provides targeted updates on IIF insurance activities and events.

There is clear consensus that carbon capture, utilization, and storage (CCUS) is critical to achieving net-zero ambitions, including in many national government plans. Carbon capture could lead to 5-6 Gt of yearly CO2 emissions reductions by 2050, equivalent to 1/6^th of current annual emissions.