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Spain Scores Better than its European Neighbors in ESG

Despite being a universe of rising assets, the war in Ukraine and the withdrawal of stimulus by central banks has slowed the pace of placements in Spain. According to Ofiso’s calculations, in the first quarter of 2022 the volume issued in sustainable bonds fell by 7% compared to the same period in 2021, to $6.6 billion (€6.3 billion). However, 15% of the Spanish capital market is already sustainable.



Spanish companies score better on ESG (environmental, social, and corporate governance) issues than their European neighbors, and are more transparent in this field. This was pointed out on Wednesday, May 18th, by Martin Nichols, regional sustainability relationship manager at S&P, at a round table organized as part of the annual meeting of Ofiso, the Spanish Sustainable Finance Observatory.

“Compared to those in other European countries, we are seeing more Spanish companies requesting an ESG rating from us and, moreover, making it public,” he explained. On the other hand, “the ratings we see in Spain are, on average, quite high relative to the global average,” he added. In general, Nichols explained, companies are very interested in knowing “how we incorporate ESG into the credit rating process, and in knowing the methodology behind sustainability ratings.” Read also: S&P Global: Spanish companies are the most vocal about their ESG credentials.

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Issuance falls by 7%

Despite being a universe of rising assets, the war in Ukraine and the withdrawal of stimulus by central banks has slowed the pace of placements in Spain. According to Ofiso’s calculations, in the first quarter of 2022 the volume issued in sustainable bonds fell by 7% compared to the same period in 2021, to $6.6 billion (€6.3 billion). This decline was due to the “uncertain outlook for the economy and for the entire financial sector” in recent months, explained sources at the Observatory, who emphasized that “sustainable financing continues to be a winning bet, despite the current circumstances.”

15% of the Spanish capital market is already sustainable, said Julián Romero, president of Ofiso.

Julián Romero, president of Ofiso, recalled the conclusions of its annual report on sustainable financing for 2021. “Growth rates, for yet another year, are not faltering. In the last three years they have exceeded 40%. The Spanish Treasury’s inaugural green bond has given a very considerable boost to this market, and also a much-needed wake-up call to the other players. 15% of the Spanish capital market is already sustainable, just over 1 out of every 7 euros is,” he said.

The event also saw the presentation of the Ofiso 2022 Awards to Caixabank, Europastry, ICO, Repsol, República de Colombia, and, in a personal capacity, the former president of the Spanish Banking Association, José María Roldán. The awards recognize their commitment to promoting the channeling of resources towards green, social and sustainable projects and activities.

Martin Nichols explained that many companies “are working on their sustainable issuance frameworks” to issue this type of debt in the future. “It’s something you don’t see, as these frameworks are, in many cases, confidential until the moment debt is issued,” but it’s also a reality that is there. “From the conversations we have with our clients and the financial institutions we work with, we know that issuers want to be ready to go to market at the most appropriate time,” he added.

Globally, issuance will continue to grow, the S&P spokesperson noted. “At the beginning of the year we estimated that placements would reach $8.5 trillion globally, and that $1.5 trillion of that would be sustainable. With the current scenario we believe that we are not going to reach those figures. But what is interesting is that the proportion of sustainable bonds is still quite high, in Europe it is already 18% of the total. Globally, the figure was 11% in 2021, and 7% in 2020.”

Susana Meseguer, Repsol’s Director of Financing, called for a “flexible” framework for financing the energy transition.

Also participating at the table was Susana Meseguer, CFO of Repsol, who agreed with Martin that the preparation of a framework for sustainable emissions involves work and time. “We spent more than a year working on ours,” she explained. The oil company issued its first sustainability-linked bonds in June 2021, for 1.25 billion euros. After the operation, “other Spanish companies have approached us to be interested in the process, because this type of debt is relatively new”.

Repsol carried out this operation following the principles published by ICMA (the International Capital Markets Association). Meseguer took the opportunity to demand a “flexible” framework to finance this energy transition. “Our strategy has, on the one hand, purely green investments, which can be financed with a green bond, and on the other hand, investments that, when worked on, lead us to decarbonization and are perfectly feasible for a sustainability linked bond”. In the opinion of Antonio Cordero, general director of Financing and Strategy of the ICO, this type of debt linked to sustainability is “a very powerful weapon to open up the world of sustainable finance to companies that, because they are not in purely green sectors”, or because of the nature of their main activity, could not access it.

ICO is an already consolidated issuer of green and social debt, with the particularity that in 2015 it marked the milestone, worldwide, of issuing the first bond labeled as social. At that time, there were no ICMA principles for placing this type of debt, only guidelines, “a step prior to those principles,” explained Cordero.

Meseguer emphasized that the war in Ukraine “has brought us back to the reality” of the risks involved in “the lack of energy autonomy” in Europe. And that, at the same time, “it is important to reflect on the energy mix”, and to take “this path towards the final objective, which is decarbonization, something on which we all agree” in a “rational” way.


(Featured image by jessiegarciasmith via Pixabay)

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Anthony Donaghue writes about science and technology. Keeping abreast of the latest tech developments in various sectors, he has a keen interest on startups, especially inside and outside of Silicon Valley. From time to time, he also covers agritech and biotech, as well as consumer electronics, IT, AI, and fintech, among others. He has also written about IPOs, cannabis, and investing.