Sustainable debt breaks annual record, points out BNEF

A survey carried out by BNEF (BloombergNEF) showed that sustainable debt reached a new record in 2020.

According to the survey, US$732,1 billion was issued in bonds and loans for environmental and social purposes. This represents a 29% increase compared to the 2019 total.

Leading the growth is the category of social bonds, which are issued to raise money for social objectives such as employment, public health and education. 

According to BNEF, the issuance of these bonds jumped seven times and accumulated US$147,7 billion in 2020. The category of sustainability bonds grew 81%, totaling US$68,7 billion, while volumes of green bonds rose 13%, registering a new record of US$305,3 billion. 

However, BNEF reported that the increase was not widespread in 2020. Both sustainability-linked and green loans saw 15% reductions in issuance, to $119,5 billion and $80,3 billion, respectively.

“Covid-19-related disruption affected the issuance of some sustainable debt instruments in 2020 but encouraged others. The market's overall growth of almost 30% showed that sustainability remains high on the agenda of investors, companies and governments”, highlighted Mallory Rutigliano, sustainable finance analyst at BloombergNEF.

“This relatively new market is now being seen as a tool that global economies can use to rebuild a greener and more socially just construction”, he added. 

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The highlight of the year in sustainable debt was the explosion in social bond issuance, helped by investor appetite for products that addressed the coronavirus pandemic and recession. 

According to Bloomberg, the majority came from government agencies and supranational bodies, lending money for healthcare and other relief initiatives. Last year, the largest individual social bonds of all time were issued, by entities such as the European Union, Unedic and the African Development Bank.

Green bonds

Green bonds, raised to support environmental activities, also saw a significant increase, especially in the final months of 2020, according to the research.

Offerings through August were down compared to the previous year, but rose in September to reach $62 billion, and the momentum continued into the fourth quarter. 

This allowed them to not only set a new annual record, but brought cumulative green bond issuance since 2007 to more than US$1 trillion.

“Increasing demand from investors and stakeholders will encourage the sustainable debt market to innovate and drive new types of instruments. There is still a need for stricter scrutiny of the sustainable credentials of these products, and more transparency from issuers will be required,” commented Maia Godemer, sustainable finance analyst at BNEF.

“However, support from central banks like the ECB and regulators around the world suggests we will see even more robust growth,” concluded Maia.