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Sustainable finance market continues 2020 growth

Matthew Toole
Matthew Toole
Director, Deals Intelligence

Matthew Toole analyzes the growth in the sustainable finance market during 2020 by looking at trends in social bonds and green bonds, sustainable lending, and equity capital markets.

  1. The third quarter of 2020 saw a record $155bn of sustainable finance raised. This increase has been fueled by COVID-19 and wider concerns about sustainability.
  2. An important element of the continued growth in sustainable finance is in social bonds. During the first nine months of 2020, they saw an eight-fold leap to $85bn.
  3. During the course of the year, amounts raised in green bonds and sustainability bond issuance have both grown strongly. These trends have offset the subdued trend in sustainable lending.

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The sustainable finance market has seen a rapid coming-of-age in the first nine months of 2020, partly in response to the COVID-19 pandemic as well as ongoing sustainability concerns.

Momentum has increased during the year, with the third quarter seeing a record $155bn raised. As a result, a record $357.5bn was raised by sustainable companies and in sustainable products globally to the end of September; a 96 percent increase on the same period in 2019.

Sustainable finance key performers

Key performers included an eight-fold increase in the issuance of social bonds, which raised $84.5bn in the period. This accounted for almost one-quarter of the sustainable finance market; up from just 6 percent last year.

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Green bonds and sustainability bond issuance

Green bonds had begun the year slowly, with $60bn raised to March. By contrast, the third quarter saw a record $76.5bn raised from 170 issuances, driven by sovereigns, multi-laterals and banks in order to finance their fights against the economic impact of reactions to the pandemic.

In addition, sustainability bond issuance tripled its year-on-year total to the end of September, to raise $97bn, with twice as many issues as a year ago.

Issuance from agency and sovereign borrowers tripled during the year, to more than match corporate activity. Europe continues to dominate the sustainable finance market, with a 48 percent market share. The Americas has a 28 percent share and Asia-Pacific 18 percent.

HSBC took the top spot in sustainable bond underwriting, with a 6.3 percent share in what remains a relatively fragmented segment. The top ten underwriters still comprise less than half of the market.

By contrast, sustainable lending ends the third quarter flat on the previous year, at $114.5bn, and slowing.

During the third quarter, just $30bn was lent, more than one-fifth down on Q2. European borrowers constitute the lion’s share, with 60 percent of the market. Notable borrowers include Italian energy group Enel SpA, Danish shipping giant Moller-Maersk, and Volkswagen subsidiary Traton SE.

Equity renaissance

Sustainable companies partook in the resurgent equity capital markets during the summer, to raise $9.7bn to the end of September, a 38 percent increase year-on-year and an all-time record. The third quarter saw a three-fold increase on the previous quarter, to raise $5.6bn, an all-time quarterly record.

The Americas dominated sustainable equity finance, with a 77 percent market share, while Asia-Pacific and Europe took 12 percent and 11 percent respectively. Bank of America Securities, Morgan Stanley and JP Morgan each commanded more than a 15 percent share of sustainable equity offerings.

Meanwhile, M&A involving a sustainable company has seen $21.6bn of activity from 350 deals so far in 2020, a two-year high by value.

Chinese sustainable companies accounted for 17 percent of the market, and U.S. companies took 10 percent. Goldman Sachs topped the sustainable company M&A table, advising on eight deals worth $6.1bn.

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