Sustainable finance bonds gained momentum last year with issuance hitting an all-time high of $544.3 bn, more than double the volume in 2019, according to data from financial information provider Refinitiv.
Green bond issuance rose 26% from 2019 to a new record of $222.6 bn. This was despite a slowdown in deal flow during the last three months of 2020, when volume fell 22% from the previous quarter to $63.3 bn.
Green bonds had a stellar fourth quarter raising $180.4 bn, the highest quarterly total by proceeds since Refinitiv started tracking the data in 2015.
Europe led the way, accounting for over half or 56% of issuance of sustainable finance bonds, followed by the Americas at 26% and Asia-Pacific issuers 16%.
Social bonds also had a bumper year with global issuance of $164.2 bn in 2020, or nearly 10 times the amount issued in the previous year.
This represented 30% of the sustainable finance bond market last year, up from only 5% in 2019.
Covid-19 has accelerated the trend for sustainable finance as investors are more interested in issues such as health, inequality, education and the environment.
Green bonds, for example, are used to fund clean energy projects such as wind farms while social bonds are targeted to socially beneficial causes.
Sustainable loans and bonds, though, still comprises a tiny slice of the market. Refinitiv estimates together they amounted to just under $750 bn in 2020, compared to total bond global issuance last year of $10.2 trn.
However, analysts expect the market to grow quickly as more capital pours into funds focused on environmental, social and governance (ESG) factors and indexes exclude debt from sectors deemed to be unethical or polluting.
This is evidenced by a report by NN Investment Partners which predicts that global green bond issuance will hit €300bn in 2021, up 50% from last year, driven by sustainable initiatives, legislation and investor demand.
The popularity is not just on the fixed income side but Refinitv figures showed that equity issuance for sustainable companies rose by 65% last year to a record $13.8 bn.
America was out in front this time, with a sizeable 62% portion while Europe was at 23% and Asia Pacific, 11%
Morgan Stanley, Bank of America Securities and JP Morgan topped the list of bookrunners for sustainable equity offerings with a combined market share of 46%.