Moody’s: Global green bond issuance reached record high amid Covid-19 crisis

The global issuance of sustainable and green bonds totalled a record $99.9bn (£75.5bn) in the second quarter of 2020, with investors increasingly focusing on ESG risks and seeking to play their part in the green recovery movement.

Moody’s: Global green bond issuance reached record high amid Covid-19 crisis

The market faced a "muted" start to 2020 but is now rebounding strongly

That is according to the latest in-depth sector analysis from Moody’s. The analysis revealed that sustainable bond issuance was 65% higher between April and June than between January and March, with social bonds and sustainability bonds leading the trend. While green bonds are used to finance projects on the basis of their positive environmental impacts, social bonds finance activities intrinsically linked to social sustainability and sustainability bonds cover a mix.

Due to these trends, Moody’s believes that combined social and sustainability bond issuance may near that of green bonds this year for the first time ever. Green loan levels are now broadly similar to those recorded in 2019, despite a drop in the first quarter of 2020, it said, while social and sustainability bond offerings are expanding rapidly.

Moody’s attributes these trends to the fact that the pandemic has “intensified the focus” on ESG issues among corporates and investors alike. While the public health crisis is a priority area for short-term investment, Moody’s believes that many organisations are recognising the ways in which natural, social and economic risks are linked, and are preparing to alter their portfolios accordingly in the long term. It sees climate change emerging as a key long-term focus.

Similarly, JP Morgan recently polled investors from 50 global institutions, representing a total of $12.9 trillion in assets under management on how they expect Covid-19 to impact the future of ESG investing. 71% said it was likely to accelerate action.

Nonetheless, Moody’s is ultimately predicting that the global green finance sector will take a hit from the pandemic, although its contraction is likely to be smaller than that felt by the economy more broadly. It had forecast that global green bond issuance would total $300bn (£226.7bn) in 2020 but has now revised this estimate to between $175bn and $225bn (£132.3bn- £170bn).

Social bond issuance, on the other hand, is likely to continue expanding through to the end of the year. Moody’s foresees issuance of $325bn-$375bn (£245.8bn-£283.6bn) during 2020, with European investors leading the way in the first half of the year and investors in the Asia-Pacific region playing catch-up in the second half.

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Sarah George

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