The total global sustainability debt market now exceeds $USD5.3 trillion, despite an ongoing calming in global issuance.
BloombergNEF data show year-to-date issuances totalled $US1,102 billion as of September 30, roughly 14.4 per cent below the same period in 2021. The decline comes amid numerous challenges being felt by markets across the globe, including rising inflation, interest-rate volatility, and geopolitical tensions.
Bonds
Bond transactions continue to dominate the sustainable finance market globally, according to Bloomberg, with green bonds remaining the issuance format of choice.
Amid a slowdown in the bond markets, green bond issuance decreased 5.4 per cent in the nine months ending September 30 compared to the same period in 2021. Total green, social, sustainability and sustainability-linked (GSSS) bond issuances declined 17.6 per cent compared to 0.8 per cent growth in the total global bond market.
While there were fewer issuances from financial services, corporates, and government agencies compared with the same period last year, total GSSS bonds from these issuers still accounted for around 69 per cent of total GSSS bonds issued for the period. The decline in issuances from financial services, corporates, and government agencies was partially offset by an increase in GSSS issues across municipalities and sovereigns globally, accounting for around 27 per cent of total green bond issuances over the period.
While S&P expects total bond issuance to decline in the 2022 calendar year, it is predicting green bonds will remain the most popular form of GSSS issuance overall. The global ratings agency further expects sustainability-linked bonds will however continue as the fastest growing GSSS issuance type year-on-year in 2022.
Loans
Sustainability-linked loans (SLLs) remain the second-largest format by GSSS issuance volume, representing 28.9 per cent of total GSSS issuances this year to date, despite declining 5.7 per cent to $US319 billion. The decline has been driven by lower corporate and financial services issuances in that format.
A notable aspect of the GSSS format in the future is expected to be the inclusion of biodiversity protection targets in sustainability-linked products. This reflects a growing acceptance that biodiversity needs to be managed in a sustainable manner, from both ethical and economic impact perspectives.
Of note
Notable transactions across the period included Opal HealthCare’s $A800 million social loan, the first of its kind in Australia’s aged-care sector. ANZ acted as sole sustainability coordinator and was the largest lender in the transaction.
The social loan supports Opal HealthCare’s five social impact pillars: caring for people, purposeful places, caring through COVID-19, community building and promoting understanding.
In Asia, OUE Commercial REIT executed the largest SLL for a real estate firm in Singapore seen to date during the period. ANZ acted as senior mandated lead arranger.
The $S978 million loan incorporates interest rate reductions if pre-determined sustainability performance targets related to energy and water intensity reduction are reached.
You can read more insights into the sustainable finance market in the latest ANZ Sustainable Insights Newsletter.
