Sustainable debt down but not out in Q2

Global sustainable debt issuance fell in the June quarter on the back of investor caution, rising interest rates and the crisis in Europe. Total issuance for the calendar year is now expected to remain largely in line with 2021.

Bloomberg data show issuance in the three months to June fell to $USD370 billion, down 21 per cent on a record performance in the previous corresponding period.

Despite the decline, the total global sustainability debt market now exceeds $USD4.9 trillion, and the period represents the second-highest June-quarter issuance seen to date.

Global issuance is expected to remain flat in the remainder of 2022. While issuance of bonds in the sustainable finance format currently sits at $USD511 billion so far this year, Moody’s expects total issuance to end up at around $USD1 trillion for 2022. 

Increased regulation and taxonomy development is expected to be a continued focus area across the rest of the year. This is expected to boost demand for sustainable finance transactions as issuers seek to highlight their ESG credentials and underlying sustainability strategies.

Further regulatory developments are expected as regional standards become better aligned. The standardisation of reporting will be fundamental for both mandatory and voluntary disclosures. 

Looking beyond 2022, Moody’s believes long-term growth potential remains strong as Europe increasingly focuses on renewables for energy security, and the publication of two new IPCC reports provides impetus for greater financing of climate mitigation and adaptation.

Green growth

Bond transactions continue to dominate sustainable finance, with green bonds remaining the most popular format of issuance. Despite bond markets slowing in the first half of 2022, green bond issuance has increased year on year.

Green bonds represented 44 per cent of all issuances in the second quarter, making up an average 40 per cent of all issuance over the past four quarters.

Sustainability-linked loans (SLLs) remain the second-largest format by issuance volume. SLLs continued to demonstrate their value during the quarter, posting a 23 per cent increase. The number of SLLs is expected to continue growing as more companies set public net-zero targets and look to link their cost of capital to their sustainability strategy.

Notable transactions across the quarter included Monash University’s $AUD105 million sustainability-linked loan. ANZ acted as sole sustainability coordinator and joint lender.

Targets for the facility include a reduction in scope one and two emissions of 72 per cent during the term of the loan.

Across the Tasman, ANZ and Silver Fern Farms partnered to establish one of New Zealand’s largest syndicated sustainability-linked capital working facilities. The $NZD320 million facility is linked to Silver Fern Farms’ sustainability performance targets.

It was the first syndicated sustainability-linked funding transaction for a meat processing company in New Zealand. 

In Asia, Singapore telecommunications firm Singtel issued a five-year, $USD100 million tokenised sustainability-linked bond on the ADDX digital securities exchange. 

You can read more insights into the sustainable finance market in the latest ANZ Sustainable Insights Newsletter.