Global issuance of environmental, social, and governance bonds could cross $1 trillion for the first time in 2021, or double the total sold for all of 2020, on increasing demand for socially responsible investments.
New issuance of green, social, sustainability, and sustainability-linked bonds (SLBs) from around the world is at a record $577 billion so far this year, or $100 billion more than all of 2020, Bloomberg reports. Looking ahead, bankers are anticipating even more ESG-related bond sales in the second half of 2021.
“What began with ‘why should I issue?’ is now ‘why aren’t you?’,” Marilyn Ceci, global head of ESG debt capital markets at JPMorgan Chase & Co., one of the biggest underwriters of sustainable bonds, told Bloomberg. “Your absence in the market says something now.”
Ceci projected that new debt sales will receive a boost from high-yield borrowers and securitized products. She projected that issuance of sustainability-linked bonds could rise to as much as $150 billion for 2021 after global SLB sales hit a record $72.8 billion year-to-date.
“Every issuer is going to want to be able to demonstrate that they have a sustainable business model,” Philip Brown, head of public sector debt capital markets at Citigroup, told Bloomberg. “What the asset owner wants, the asset manager provides, and the issuer has to respond if they want to reach these portfolios.”
Citi projects further momentum in Europe, which has been a global leader on ESG. For the first half of the year, 26% of euro-denominated corporate investment-grade debt sales were ESG-related, a 9% increase when compared to the the same period last year.
“ESG is part of every conversation that we have now with all corporate issuers in Europe,” Brown added.
Brown attributed the increased interest for ESG-related bonds to the rapid evolution in the availability of data and ESG reporting.
Looking ahead, bond bankers are anticipating a long-term opportunity in this new type of debt market.
“The growth in ESG funding markets will exceed anything you’ve seen so far,” Tom Joyce, head of capital markets strategy at Mitsubishi UFJ Financial Group Inc., told Bloomberg. “This is a holistic, systemic change in the way the entire global financial market is structured and in the way business strategy and the regulatory environment operates.”
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