ESG bond issuance doubles in Q1

Environment, social and governance bond issuance doubled its share of total European bond issuance in the first quarter of this year according to The Association for Financial Markets in Europe (AFME).

ESG bond issuance at the end of March this year represented 17.2% of total European bond issuance, up from 8.9% for the whole of last year according to AFME’s latest European ESG Finance quarterly data report (see chart). Issuance consisted of 7.6% green bonds, 8.4% social bonds, and 1.2% sustainability bonds.

The top three issuers – the European Union, France and Italy – accounted for two thirds of the new issuance.

The EU Commission (on behalf of the EU) continued to lead the ESG market through raising €36bn in social bonds. Last month the European Union said the total “Next Generation EU” bond issuance will be €800bn, including nearly one third, €250bn, as green bonds between the middle of this year and 2026 according to ING. The issuance aims to support the European green transition, boost the green bond market and enable investors to diversify their portfolio of green investments.

In March this year Italy raised €8.5bn to support the target of climate neutrality by 2050 which Nordea said was the world’s largest sovereign green bond to date.

Global issuance of sustainable bonds – green, social and sustainability bonds – was a record $231bn in the first quarter of this year, more than three times higher than the same quarter last year according to a report from Moody’s Investors Service. Moody’s forecast that the combined green, social and sustainability bond market is on pace to surpass its previous forecast of $650bn for all of this year.

Matthew Kuchtyak, AVP-Analyst, Moody’s.

Matthew Kuchtyak, AVP-Analyst in Moody’s Investors Service’s ESG Group, said in a statement: “Sustainable bond volumes are surging this year given strong sustained interest among debt issuers and investors. A heightened level of governmental policy focus on climate change and sustainable development globally will also spur further market growth and harmonization.”

He added that governments globally are increasingly pursuing policies that will lead to more rapid decarbonization and green infrastructure investment, gradual clarity around the criteria for activities to be considered sustainable, and greater international collaboration around sustainable finance initiatives.

©Markets Media Europe 2021

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