Issuers of securities across the European Union are putting a greater focus on sustainable finance than they were this time last year, despite the current unprecedented global pandemic.
While the markets are facing intense challenges, capital market issuers in Europe are attaching greater importance to sustainable finance, according to the HSBC Sustainable Financing and Investing Survey 2020.
While the European Commission’s plans to issue EU SURE bonds of up to €100bn as social bonds is aimed at protecting jobs, this social goal also sits well with the rise in sustainable capital market investment.
Investor appetite for green bonds in Asia will be very evident at the ‘Roadmap for ASEAN Sustainable Capital Markets’, a virtual event due to be co-hosted by global green bonds specialist ICMA and ASEAN Capital Markets Forum (ACMF) on Wednesday, October 21. The event will feature monetary and security authorities from all across Asia.
In June, when ICMA discussed the topic ‘2020 Green Bond Principles and Social Bond Principles’ at its AGM, the event featured inputs from the European Bank of Reconstruction and Development, European Investment Bank, JP Morgan, Nordic Investment Bank, Zurich Insurance, IFC and Crédit Agricole.
The ICMA event also featured HSBC Bank sustainable bonds specialist Farnam Bidgoli. As HSBC’s own survey shows, the current trend towards sustainable finance is also particularly strong in Ireland.
Alan Duffy, CEO HSBC Ireland, said: “Over the last 12-18 months, we’ve noticed a significant uptick in interest in sustainability within the Irish corporate and investor community. The Covid-19 pandemic has accelerated this trend and we are not surprised to see this coming through in the survey responses. In particular, clean energy has become a key priority here in Ireland and we are seeing a surge of interest in renewable energy here. This was evidenced by the first auction under the new Renewable Electricity Support Scheme (RESS) which took place in August with 1.3GW of wind and solar projects proving successful. Ireland has an ambitious target to reach 70% share of renewables by 2030 and we expect to see a flurry of activity in the coming years.”
The survey found that the Covid-19 pandemic has strengthened belief in sustainability for more than a third (36%) of European issuers. Three-quarters (77%) also say the pandemic has either reinforced their commitment to Environment, Social and Governance (ESG) or made them realise they had paid too little attention to the social component of ESG.
European issuers are now the most committed in the world to environmental and social issues, according to the survey, with 95% saying these issues are ‘very important’ (76%) or ‘somewhat important’ (19%), compared to 93% globally.
“Sustainable infrastructure and smart cities are also key focus areas for Irish corporates and investors alike and sustainability is now being incorporated as a core design feature into almost all new projects,” Alan Duffy added. “For example, last year, HSBC Ireland delivered Ireland’s first ever Green Loan Principles compliant loan for Singapore based property group Oxley and Dublin based developer Ballymore to part fund the construction of three commercial office blocks in Dublin.”
The most important factor behind European issuers’ commitment to environmental and social issues is their values (62%). Other factors include their confidence in the return potential of sustainability (36%) and external drivers, notably NGOs (41%) and customers (36%).
Among European investors, 79% believe environmental and social issues are very or somewhat important, compared to 86% of investors globally. For European investors, social pressures (47%) and regulatory pressures (43%) are the strongest influences on their attitudes.
The survey also found that Europe leads the way when it comes to investors feeling a responsibility to avoid investments with negative impacts on environment and society – 61% of European investors feel this way, compared to 53% globally.
HSBC Global Research has found that stocks of large companies with stronger ESG ratings have outperformed the global average by 4.7% since mid-December 2019. For climate-related stocks the gap is even bigger, with performance 13% better than the global average over the same period.
Source Irish Examiner