Sustainable finance surges in 2020

Matthew Toole

Matthew Toole

Director, Deals Intelligenc

Last year was a landmark for sustainable finance. Social and sustainability bonds smashed their previous records for amounts raised, while green bonds hit new highs and sustainable companies issued record levels of equity.

  1. In 2020, issuance of social bonds reached a record $164bn, a figure nearly ten times that of 2019.
  2. Over the same period, sustainability bonds also increased. They also recorded a record figure of $128bn, which was three times that of 2019.
  3. Equity issuance from sustainable companies in 2020 increased by 65 percent to a record $14bn.

The market for sustainable finance products saw a flood of demand during 2020, driven by interest in social bonds, sustainable bonds and green bonds.

Sustainable finance bonds issuance doubles in 2020

Issuance of sustainable finance bonds doubled during 2020, to reach an all-time record of $554.3bn. Demand leapt every quarter of 2020, from less than $70bn in Q1, through to $180bn in the last three months of the year, marking the highest quarterly total since our records began in 2015.

Within that, the social and sustainability bond categories each surpassed $100bn for the first time, as sovereigns, multi-laterals and banks financed relief efforts related to COVID-19’s economic disruption.

Remarkably, social bonds surged by nearly tenfold to reach $164.2bn globally. This accounted for 30 percent of the total amount that was raised by the sustainable finance bond market during 2020, compared with a 5 percent share in 2019.

Meanwhile, sustainability bonds were a relative laggard, surpassing their 2019 total by a ‘mere’ factor of three, to reach $127.6bn.

How did green bonds hit a new annual record?

This surge in social and sustainability bond issuance didn’t appear to detract from other sustainable finance categories.

Green bond issuance increased by more than a quarter, to $222.6bn, marking a new annual record. After an all-time record quarter from July to September, green bond issuance took a breather in Q4, dropping 22 percent to $63.3bn.

Driving this surge in demand were agency and sovereign issuers, which tripled their activity year-on-year, to account for 56 percent of the market.

European issuers continued to dominate, with a 53 percent market share, followed by the Americas with 26 percent, and Asia-Pacific with 16 percent.

The top ten bond underwriters, led by JP Morgan, which consolidated its position to take almost half the market.

In contrast, the market for sustainable syndicated loans was quiet, with a modest 3 percent increase on 2019, keeping it just below the $200bn threshold for the year. Indeed, the market was saved from a down-year by a last-quarter surge that hit $75bn.

European borrowers continue to dominate the sustainable loan market, with a 64 percent market share.

Sustainable equity issuance

Equity issuance from sustainable companies reached $13.8bn during 2020, an annual increase of 65 percent and an all-time record.

The Americas accounted for 62 percent of the sustainable equity market during 2020, followed by Europe (23 percent) and Asia-Pacific (11 percent). The top three global bookrunners were Morgan Stanley, Bank of America Securities and JPMorgan, sharing 46 percent of the market.

With so much follow-on capital being issued in the market, the appetite for acquiring companies was muted, resulting in a 9 percent decrease in M&A of sustainable companies, by value, marking a three-year low.

Europe continues to dominate this market, taking 43 percent of sustainable M&A in 2020. However, by number, the market held up, at 497 deals during 2020, propped up by Chinese targets and acquirers, which took one-fifth of the sustainable M&A market. The U.S. was a distant second, at 9 percent.

Topping the advisory league table for corporate M&A in sustainable industries for 2020 was Goldman Sachs, advising on eight deals valued at US$6.2bn, followed by JPMorgan and Nomura.



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