According to new data from analysts BloombergNEF (BNEF) 2019 was a breakthrough year for sustainable debt, with issuances setting a string of new records and taking the all-time cumulative total above US$1 trillion.
The BNEF report shows a new record was set in 2019 for the volume of sustainable debt issued globally in any one year, with the total hitting US$465 billion globally, up a remarkable 78 Per cent from US$261.4bn in 2018.
As a result last year also saw all-time, cumulative issuance of sustainable debt smash through the US$1tr barrier, and reach US$1.17 trillion by December 31, based on the latest figures of the comprehensive sustainable debt universe captured by BNEF.
Jonas Rooze, lead sustainability analyst at BNEF, commented: “Our data show sustainable finance continuing to power ahead on a global basis.
“The steep increase is fuelled 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.”
Sustainable debt covers a variety of instruments, from the well-established area of green bonds to the fast-emerging category of sustainability-linked loans.
Green bonds, constituting more than half of the entire sustainable debt market in 2019, saw US$271bn issued, up from US$182bn in 2018.
Green bonds are securities with proceeds used entirely for environmentally friendly projects, like renewable generation or marine habitat conservation.
BNEF also saw an almost-threefold increase in the volume of sustainability bonds issued last year, to a record US$46 billion.
“This is the biggest jump for sustainability bonds ever, showing interest from borrowers and investors in securities that combine support for both social and environmental activities,” said Mallory Rutigliano, green and sustainable finance analyst at BNEF.
Some of the most spectacular growth of all is being seen in sustainability-linked loans, now the second most popular thematic debt type.
This category, consisting of loans linked to the borrower’s performance on defined environmental, social or governance (ESG) criteria, enjoyed a 168 per cent jump in volumes to US$122bn in 2019.
“We have observed substantial growth in loan volumes, but also innovative financing mechanisms.
“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,” said Ms Rutigliano.
A new sustainability-linked bond category was introduced in the last half of 2019.
Enel, the Italian utility company, issued the four inaugural bonds in this category in September and October.
The coupons on these securities are tied to Enel’s renewable energy generation goals.
“This is another example of the creativity that has been a hallmark of the sustainability-themed debt market during its relatively short existence”, commented Mr Rooze.
Innovation of this kind is not unusual in Europe, which has pioneered the field, and still makes up 53 per cent of the global market for all sustainable debt.
In 2019, the EMEA region issued US$262 billion worth, with AMER and APAC vying for second place with US$95 billion and US$80 billion, respectively.
For yet another year, the mortgage financing organization Fannie Mae was the number one issuer of global sustainable debt, securitising mortgages to the tune of US$22.8bn.
Following this is the energy provider Royal Dutch Shell, which issued a sustainability-linked loan for US$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 US$13.3bn.
BNEF will publish an in-depth review of the sustainable finance market in its semi-annual Sustainable Finance Market Outlook, due out later this month.
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