2019 was a breakthrough year for sustainable debt, with issuances setting a string of new records and taking the all-time cumulative total above $1tr, according to new data from BloombergNEF.
The influential analyst firm reported yesterday that sustainable debt issuances for last year totalled $465bn, a record high which was up a massive 78 per cent on 2018’s total of $261.4bn.
The result easily outstripped not only 2018’s total of $182bn, but also the most bullish forecasts from the start of last year. For example, Nordic bank SEB had predicted “bright growth prospects” which would lift the market to $210bn, with the potential to “surprise to the upside” by reaching $240bn.
In the end, the market sprinted beyond even that optimistic outlook, as corporate and government interest in green bonds soared.
“Our data show sustainable finance continuing to power ahead on a global basis,” said Jonas Rooze, lead sustainability analyst at BNEF. “The steep increase is fueled by end-investors’ concerns about the threat of climate change, and the desire of many big company, bank and government leaders to be seen as behaving responsibly.”
Growth in green bond issuances was accompanied by expansion elsewhere in the sustainable debt market. Some of the most spectacular growth was seen in sustainability-linked loans – a category consisting of loans where interest rates are linked to the borrower’s performance against defined environmental, social or governance (ESG) criteria – which enjoyed a 168 per cent jump in volumes to $122bn.
The volume of sustainability bonds also grew substantially, increasing almost three-fold to $46bn. The update follows BloombergNEF’s revelation last autumn that more than $1tr of sustainable debt had been issued since records began in 2012.
“We have observed substantial growth in loan volumes, but also innovative financing mechanisms,” said Mallory Rutigliano, a green and sustainable finance analyst at BNEF. “To take one example, we’ve seen a loan for a renewable energy project, with the amount of interest charged linked to the gender equality performance of the company owning it. Sustainability-linked loans allow for new flexibility in how the proceeds of the loans are used and this has whetted the appetites of a wide variety of borrowers.”
Mortgage financing organisation Fannie Mae led the way as the number one issuer of global sustainable debt, securitising mortgages to the tune of $22.8bn.
The company was followed by energy giant Royal Dutch Shell, which issued a sustainability-linked loan for $10bn – its first ever themed instrument of any kind – in December. The governments of the Netherlands and of France were notable sovereign issuers in 2019, together issuing $13.3bn of green bonds.
Source BusinessGreen