Total sustainable debt issuance in 2020 was $732 billion, with social and sustainability bonds enjoying spectacular growth, and green bonds seeing a late-year surge
London and New York: Sustainable debt hit a new record in 2020 for greatest volume of issuance in a year, at $732.1 billion across bond and loan varieties raised with environmental and social purposes in mind, according to new figures from research company BloombergNEF (BNEF). This represents a 29% increase from 2019’s total.
Spearheading the growth was the category of social bonds, which are issued to raise money for social objectives such as employment, public health and education. Issuance of these instruments jumped sevenfold to $147.7 billion in 2020.
Another category of sustainable debt – sustainability bonds – grew 81% to $68.7 billion, while the longest-established theme, green bonds, saw volumes rise 13% to a new record of $305.3 billion. Growth was not across the board in 2020, however: both sustainability-linked loans and green loans saw 15% reductions in issuance, to $119.5 billion and $80.3 billion respectively (see Figure 1).
Mallory Rutigliano, a sustainable finance analyst at BloombergNEF, commented: “Covid-19-related disruption affected issuance of some sustainable debt instruments in 2020, but spurred others. Overall growth of almost 30% in the market showed that sustainability continues to rise up on the agenda for investors, businesses and governments. This relatively new market is now being seen as a tool global economies can use to build back greener and socially fairer.”
The highlight of the year in sustainable debt was the explosion in social bond issuance, helped by investor appetite for products that addressed the coronavirus pandemic and the recession. The vast majority of issuance of these bonds came from government agencies and supranational bodies, borrowing money for healthcare and other relief endeavors. Last year saw the largest single social bonds issued ever, from entities such as the European Union, Unedic, and African Development Bank.
Green bonds, raised to support environmental activities, also saw an impressive swell, particularly in the closing months of 2020. Offerings through August were down compared to the prior year, but they surged in September with a whopping $62 billion, and the momentum continued in the fourth quarter. This allowed green bonds not only to set a new annual record, but took cumulative green bond issuance since 2007 to more than $1 trillion.
Maia Godemer, sustainable finance analyst at BNEF, commented: “Growing demand from investors and stakeholders will encourage the sustainable debt market to innovate and push new types of instruments. There is still a need for stronger scrutiny of the sustainable credentials of these products, and more transparency will be required from issuers. However, the backing of central banks like the ECB and of regulators around the world suggests we will see further, robust growth.”
Figure 1: Global sustainable debt annual issuance, 2013-2020
The BloombergNEF sustainable debt universe consists of green bonds, green loans, social bonds, and sustainability bonds that follow the use-of-proceeds requirements set by the International Capital Market Association (ICMA) and Loan Market Association (LMA), as well as all sustainability-linked bonds and loans that follow the guidelines set by the ICMA and the LMA. BNEF also breaks out a subset of this universe into core “principles-aligned” bonds and loans that follow all ICMA and LMA recommendations, such as specific reporting or project selection criteria.
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.