Environmental social and governance (ESG) bond and loan issuance surged 228% to €184 bn from €56.1 bn in the first quarter 2021 compared to the same period last year and 19.8% higher from the €153.6bn in the last three months of 2020, according to AFME’s European ESG Finance quarterly data report.
ESG bond issuance represented 17.2% of total European bond issuance during the first quarter this year, up from 8.9% for the 2020 full year.
Breaking it down, around 63.5% of ESG bonds were issued in the sovereign, supranational and agency sector, 18% by financial institutions, 18% by non-financial corporates and 0.4% in asset back and residential mortgage back securities.
In terms of activity, the first quarter saw green bond issuance increase 41% year on year to €60 4 bn from € 22 4 bn while social bond issuance rose sharply to €66.3 bn from €19. 7 bn.
The EU Commission has continued to lead the ESG market with € 36bn in social bonds issued during Q1 2021.
The report noted that spreads of green and ESG bonds, against non-sustainable benchmarks, also known as “Greenium,” have continued to tighten from 9 basis points in April 2020 to 1bp on average in April 2021.
Corporate green instruments have been especially impacted with closer to virtually zero bps in April 2021.
One of the main reasons according to AFME is the substantial increase in supply of new ESG and green instruments. The report also notes that ESG securitisation issuance has grown at a rapid pace, reaching €1.1bn in Q1 2021, surpassing the total amount – € 0.8bn – during the entire year in 2020.
On the global stage, ESG funds continued to grow exponentially during the first quarter, Funds with an ESG mandate including mutual and exchange traded funds, totalled $4.3tn, up from $2.6tn during the same period in 2020.
ESG equity funds remain the most dominant and are three times larger than their fixed income counterparts.
©Markets Media Europe 2021