European ESG Bond & Loan Issuance Decelerates11.29.2021
From the Association for Financial Markets in Europe (AFME)’s latest European ESG Finance quarterly data report for Q3 2021:
Read AFME's latest European #ESG Finance quarterly data report which shows despite a slowdown in the third quarter, 2021 has already seen €110bn more invested in the market than all of 2020.
Other key findings can be found here:https://t.co/QGy1szW0BJ
— AFME (@AFME_EU) November 29, 2021
European ESG bond and loan issuance decelerated in Q3 2021 compared to Q2 2021. The decline was driven by lower sustainable-linked and green-linked loan origination, seasonal factors, and the finalisation of the EU SURE scheme which in previous quarters significantly contributed to expand the social bond market.
- Notwithstanding the quarterly decline, year-to-date ESG bond and loan issuance volumes (€498.9bn) have already surpassed the 2020FY total (€388.7bn).
- ESG bond issuance represented 18% of total European bond issuance in Q1 – Q3 2021.
- ESG securitisation issuance in the first three quarters of 2021 reached EUR 7.5bn from eight ESG deals covering a variety of asset classes (RMBS, consumer ABS, and on-balance sheet ABS). This represents a substantial increase from EUR 2.1 bn issued in 2020FY.
- In Q3 2021, the UK and Spain notably issued inaugural sovereign green bonds of £10bn and €5bn respectively. The inaugural UK green gilt was the largest green bond issued during Q3 2021.
Carbon prices: the European Union Allowance (EuA) price per metric tonne has continued to increase during the year, reaching €61/Tn at the end of September 2021 (and most recently €66/Tn in November 2021) from €32.8 in December 2020.
EU and UK forward curves continue to anticipate further carbon price increases.
Global ESG Funds slightly decreased during Q3 2021, however exhibiting annual and year-to-date increases.
- Funds with an ESG mandate (including Mutual Funds and ETFs) totalled $4.87tn as of Q3 2021, a $0.9bn decrease from $4.96tn in Q2 2021 and a $1.26tn increase from $3.7tn in Q3 2020.
- ESG equity funds continue to be by far the largest fund asset class with 52% of total ESG funds and over 2x larger than fixed income which represents 21% of the total.
ESG price premia: spreads of corporate ESG bonds against non-sustainable benchmarks have stabilized since April 2021.
- ESG corporate premia has tightened from 9bps in April 2020 to 1bp on average during the months of April – November 2021.
- Sovereign green premium has widened for benchmark liquid references. The average greenium for German bunds has widened from an average of 2bps in December 2020 to 5bps in November 2021.
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