Sustainable debt challenges gloom for spectacular growth in 2020

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Sustainable debt had an exceptional year in 2020, despite the challenges posed by the Covid-19 pandemic, increasing by 29% from the previous year to reach $ 732.1 billion.

Sustainable debt is defined as bonds and loans raised for environmental and social purposes. There has been dramatic growth in social and sustainability bonds, with a late surge in green bond issuance further boosting growth, according to new figures from research firm BloombergNEF (BNEF).

Social bonds, which are issued to raise funds for measures to improve employment, public health and education outcomes, increased sevenfold to $ 147.7 billion.

Durable bonds also saw strong growth, with issuance 81% higher than the previous 12 months to $ 68.7 billion, while the largest segment of the market, green bonds, hit a new record of $ 305.3 billion, up 13% from 2019. However, green loans and loans linked to sustainability goals both fell 15%, reflecting the global economic slowdown caused by the pandemic.

“The Covid-19 disruption affected the issuance of some sustainable debt securities in 2020, but boosted others,” said Mallory Rutigliano, sustainability analyst at BloombergNEF. “The global growth of nearly 30% in the market has shown that sustainability continues to be a priority for investors, businesses and governments. This relatively new market is now seen as a tool that global economies can use to rebuild a greener and more socially just business. “

The explosion in social bond issuance has been the big story of the year for the sustainable debt sector, fueled by investor appetite for products that address the impacts of the coronavirus pandemic and the recession that followed, which caused widespread unemployment and highlighted a number of other social issues, including the problems of the odd-job economy and the challenges many people face in accessing health care.

The vast majority of issuance of these bonds came from government agencies and supranational bodies, borrowing money for health care and other relief measures. Last year, the largest single social bonds ever issued by entities such as the European Union, Unedic and the African Development Bank.

Green bonds, lifted to support environmental activities such as the installation of renewable energy capacity, energy efficiency measures and electric vehicle charging infrastructure, have also seen an impressive increase, particularly towards the end of the year. the year. Until August, offers were down from the previous year, but a massive $ 62 billion issuance in September paved the way for a strong fourth quarter that not only saw green bonds establish a new annual record, but also resulted in the cumulative issuance of green bonds since 2007. to more than $ 1 trillion.

“The growing demand from investors and stakeholders will encourage the sustainable debt market to innovate and promote new types of instruments,” said Maia Godemer, sustainable finance analyst at BNEF. “There is still a need to take a closer look at the sustainability credentials of these products, and more transparency will be demanded from issuers. However, support from central banks like the ECB and regulators around the world suggests we will see a more sustained growth. “

Figure 1: Global annual sustainable debt issuance, 2013-2020

Source: BloombergNEF, Bloomberg LP

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