ESG bonds rise by 270% year-on-year as finance community assists Covid-19 response
The issuance of Environmental, Social, and Governance (ESG) bonds has increased by 272% year-on-year, as investors and insurance firms take proactive steps to respond to the coronavirus pandemic.
According to research from the Morgan Stanley Foundation, the issuance of green ESG bonds in April 2020 was 272% higher than the same month the year prior, with the total issuance figure sitting at $48.5bn.
The majority of the total issuance was focused on supporting Covid-19 relief efforts, with 76% of the finance coming from Sovereigns, Supranationals and Agencies (SSAs) that bridge the gap between government and private credit issuers.
While the total number of ESG bonds has increased modestly from 43 in March to 51 in April, the average size of the bonds has increased by 160%, from $583m to $951m.
In total, around $23bn of the proceeds from the bonds will be used to address the public health and economic fallout from the COVID-19 pandemic. In fact, Morgan Stanley notes that it is the first time that this type of funding has exceeded green bond issuance – predominantly used to finance low-carbon projects – in a single calendar month. It suggests that the finance community is pivoting to focus on immediate short-term health implications.
Green bond growth
Global green bond issuance last year reached an all-time high in terms of both individual bonds issued and collective value issued, global law firm Linklaters concluded earlier this year. Based on data from Thompson Reuters, 479 green bonds were issued by companies, governments and financial organisations in 2019, up from 382 in 2018.
The collective value of green bonds issued in 2019 was $185.6bn (£141.7bn), compared to $142.4 (£108.8) the year prior. Linklaters’ analysis covers all bonds specifically created to fund projects that deliver environmental benefits in terms of emissions, resources, waste or habitats.
Linklaters is predicting further growth in the French and German green bond markets, and for this growth to broaden across the continent, as the EU’s new taxonomy regulations on green finance come into effect in 2021. The new regulations aim to tackle greenwashing and ensure adequate finance is allocated to meet the aims of the bloc’s Green New Deal, which includes a 2050 net-zero target.