The Covid-19 pandemic has significantly shifted market dynamics for sustainable finance bond issuance. Marie Kemplay reports.

It has been a busy start to the year for sustainable finance bond issuance, with $155.4bn worth of bonds issued via 361 deals in the first six months of 2020, according to Dealogic. This is a 21% year-on-year increase and the highest issuance volume for the first half of a year on record.

Sustainable finance bond issuance covers green bonds (bonds that support projects with environmental benefits), social bonds (bonds that support positive social outcomes) and sustainability bonds (a hybrid of green and social bonds).

The circumstances created by the pandemic have had a significant impact on market dynamics. The level of green bond issuance, an area which has consistently been on the increase, dropped from $99.8bn in the first half of 2019 to $92.5bn over the first six months of 2020. However, social bond issuance has increased significantly, a total of $38.5bn of debt aligned with social guidelines was raised during the first half of the year – a 351% increase on the $8.5bn sold in the first half of 2019. Sustainability bonds also went up year-on-year by 23% to $24.4bn.

The profile of issuers has also shifted considerably. In the first quarter, corporate issuers tapped the market for a total of $26.4bn, compared to $23.9bn issued by supranational, sovereign and agencies (SSAs). Whereas in the second quarter, driven by the surge of social bonds, SSA issuance reached $48.1bn compared to $22.1bn for corporates.

Europe continued to lead the way on sustainable issuance, with $98.5bn raised by European borrowers compared to $30.1bn in North America and $14bn in north Asia.

French unemployment insurance agency, Unédic, topped the table for deal size during this half-year, with the two largest-ever social bond issuances by any issuer in any location; the euro-denominated bonds were worth $4.5bn and $4.3bn, respectively. The largest green bond was issued by Société du Grand Paris, an agency leading development of new train lines in Paris, worth $2.6bn.

Sustainable finance continues to be an area of significant focus for many banks. In the first half of 2020, HSBC topped the table of bookrunners for sustainable finance bonds by volume, acting for $10.67bn-worth of issuance through 62 deals. It was followed by Bank of America Securities, which was a bookrunner for issuance worth $10.47bn and 55 deals, and Crédit Agricole, with $9.96bn-worth through 46 deals.

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