Sustainable debt issuance had an unprecedented boom in 2020 and this year is clearly on track to set a new record. Placements of ESG-labeled bonds, whether for meeting environmental, social, or corporate governance criteria, have already exceeded in Europe the volume of all that was issued in the whole of last year in this type of debt. More than $260 billion (€220 billion), according to data from the IGM consulting firm.
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Strong investor demand is ensuring the success of debt issues with the sustainable label
In fact, this strong demand from all the funds that must meet the ESG criteria that they advertise to their clients makes sustainable debt issues cheaper than conventional ones, which feeds back into the avalanche of this type of placement. “It is currently a record year for sustainable issues in Europe, with unstoppable growth on both the issuer side and, especially, on the investor side,” Natixis pointed out.
Sustainable issues have received a major boost in Europe from sovereign debt, with Germany and Italy launching green bonds and with the strong expectation around the sustainable issues with which the EU will finance the Next Generation fund.
In corporate debt, ESG issues are also extending to sectors that are controversial in terms of their sustainability, such as the oil sector, which is in the midst of a long-term decarbonization process. Repsol placed 1.25 billion euros this week, 250 million more than initially planned. And also in the MARF alternative debt market, sustainable bonds are a priority for issuers and investors.
Ricardo Benedé, director of fixed income origination at Beka Finance, recognizes that “we are looking for an angle that allows us to obtain a green or sustainable seal for an issue”. This is the case of the promissory note issue launched in April by Pikolin, the first one linked to sustainability in this type of short-term debt.
The rating agency Scope points out that the weight of corporate issues with a sustainable seal is still modest in relation to the total issued in private debt in Europe, at 18%. The percentage is, however, much higher than the 8% of 2020 and the agency forecasts that it will rise to 30% during the second half of the year. In the balance of the year, ESG-labeled European corporate issuance will account for more than a quarter of the total, according to Scope.
The boost in sustainable issues contrasts with the more modest performance of the highest-quality corporate placements in Europe during the year, with an investment-grade rating, regardless of whether or not there is an ESG label. $185.7 billion (€157 billion) in the first half of the year, around half the volume of the first half of the previous year, according to data compiled by Bloomberg. Quality companies have taken advantage of the minimal cost of funding to obtain liquidity and in a context of recovery, their issuance pace could be lower than seen so far.
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First published in Cinco dias, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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