This is what the Spanish Sustainable Finance Observatory OFISO states in its recently published Annual Report on 2020. According to the research, last year was the year of social bonds: in Spain, they reached $3.4 million (€2.82 million) with a rise of 88% and globally they multiplied by more than 6 times their volume. Likewise, green bonds increased by 44% and sustainable bonds showed a growth of 62%.
There are not so many times when a year leaves an indelible mark on the whole of humanity. No doubt 2020 will be remembered for the coronavirus, a cocktail of pandemic, pain, and economic crisis. But not all has been bad news in the year that has just gone, in the world of sustainable finance, has also left an indelible mark: the emergence of social bonds.
Sustainable finance is making steady progress in Spain. The COVID-19 crisis might have led us to believe in the spring of 2020 that sustainable finance would suffer an impasse, but on the contrary, record volumes have been recorded. The pandemic has only increased the general awareness that corporate purpose and commitment to ESG factors not only defend sustainability but also add value to companies, facilitate their financing, strengthen their corporate reputation, retain talent and the best human resources, and reinforce their competitive capacity and long-term revaluation.
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Sustainable financing grew by 45% last year in Spain
The Spanish Observatory of Sustainable Financing – OFISO – has published its Annual Report on 2020, which clearly shows that sustainable financing grew in Spain last year by 45% to reach $39.9 million (€33.03 million), after the initial hesitation due to the coronavirus crisis. Another strong fact that emerges from the document is that one out of every 10 euros issued in the Spanish capital market is sustainable. In addition, the report warns that green, social and sustainable bond issues in our country account for $18.1 (€15.02 million) of the above figure, 54% more than the previous year. On the other hand, sustainable loans, including project finance, contribute $21.7 million (€18 million), with an increase of 38%.
The pandemic, far from slowing down sustainable financing has catapulted it, with the reactivation of the sustainable financing market to the point of managing to end the year with figures and volumes that seemed unthinkable halfway through the year, growing by 18% compared to 2019 to globally reach $720.6 billion (€596.7 billion), according to data recently published by Bloomberg, with special relevance in the issuance of social bonds. It can be said then that 2020 has been the year of Social Bonds, true protagonists of the market that multiplied by more than 6 times their volume globally.
In Spain, where they had a much higher relative weight, they also achieved the highest growth among the three categories with 88% and $3.41 million (€2.82 million) issued. The sustainable bonds segment, meanwhile, contributed $3.72 million (€3.08 million) and a growth of 62%. Green bonds, on the other hand, registered $11 million (€9.12 million), up 44%, through 28 transactions carried out by 22 issuers, compared to 20 transactions and 14 issuers in the previous year. These truly impressive figures show the unprecedented growth of the sector.
Furthermore, the research warns that the global size of sustainable debt will be equal to that of high yield debt by 2020, confirming that it is not a niche market but a very important segment in the global debt market as a whole, with one of the highest growth potentials. Following this trend, the number of operators in the domestic sustainable financing market grew last year. In addition, the Community of Madrid once again led the ranking by individual volume, with $2.73 million (€2.26 million). By volume of issues, BBVA and CaixaBank stood out. The explosion in the field of sustainable finance generated significant benefits in our country. The growth of the sustainable bond segment has attracted more financial institutions to Spain in intermediation, BBVA is the new leading intermediary.
The aforementioned OFISO Annual Report concludes that sustainable finance will continue to be a prominent vector in financial activity and in the capital markets and, given the current outlook, will even increase in volume by 2021, approaching the trillion dollar mark in all its instruments and formulas. In addition, the document foresees that the sustainable lending segment could experience a significant leap forward and will serve to broaden the base of medium and small companies that are committed to increasing their sustainability purpose and to binding themselves to the conditions contemplated in this type of loans with respect to their performance.
The document also predicts that, contrary to what has been the trend in previous years, this year government and public incentives will be intensified to stimulate the economy and the productive fabric and also, as a novelty, ESG factors will be incorporated into the eligibility criteria for aid programs aimed at recovery in almost all countries. Finally, the study considers that regulation in all aspects of sustainable financing will continue to advance and even intensify at all levels and geographies as an indispensable factor in boosting and consolidating this channel of financing and attracting new capital flows.
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First published in Diario responsable, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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