Sustainable debt issuances surpass $1trn landmark

The total issuance of green bonds, loans, and other forms of sustainable debt has surpassed $1trn (£0.8trn) in a landmark moment for the market, BloombergNEF (BNEF) has revealed.

The research company's analysis shows that $319.8bn of sustainable debt has been issued this year, up from $264.4bn in 2018, $199bn in 2017, and $109.7bn in 2016.

This covers green bonds and loans that finance projects with positive social and environmental benefits, as well as debt securities that react to the sustainability of the borrower.

The figures reflect growing interest in the green economy, with some markets like Japan even offering financial benefits for issuers of sustainable debt to boost investment opportunities.

“Reaching the trillion dollar milestone is a key moment for the sustainable debt market – if this market wasn't on the radar of major global investors, it will be now,“ said Angus McCrone, chief editor at BNEF.

“This is just the beginning – while it took 12 years to find the first trillion dollars of sustainable debt capital, it will take much less time to reach the second trillion.“

Green bonds remain the most popular financing option, representing 77% of the sustainable debt market, with a total of $788bn issued to date.

Sustainable debt issued by instrument type is shown below ($bn):

BloombergNEF said that sustainability-linked debts, which offer explicit price incentives to borrowers or investors, are a particularly important new innovation for the market.

Italian utility giant Enel SpA was the first company to issue a sustainability-linked bond in September, and has committed to boost the interest rate the bond pays if it fails to meet its own renewable energy generation targets.

“The sustainability-linked model is a crucial development for the sustainable debt market,“ said Mallory Rutigliano, a green and sustainable finance analyst at BNEF.

“The bonds and loans are considered sustainable not because of the use of proceeds, but because of how the borrower commits to making sustainability improvements.

With the transition to a lower-carbon economy and inclusive growth on the agenda of many major companies, the concept is gaining traction.“

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