Sustainable finance update: July 2020

An Australasian perspective on sustainable finance markets.

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Market overview

S&P sees surge in social bond issuance due to COVID-19

Corporate and financial issuers will be more active issuers of social bonds as they focus on reducing social risks due to the COVID-19 pandemic, in contrast to the broader global fixed income market this year.

The market has diversified lately, with government agencies, corporate and FIGs stepping up social bond issuance activity.

Sustainable firms, responsible investments outperform

The Responsible Investment Association Australasia (RIAA) report highlights research from MSCI, AXA, Fidelity, Schroders, Blackrock and Morningstar showing outperformance during the COVID-19 pandemic.

Dealogic H1 20 sustainable finance market update

  • Global sustainable finance bond issuance reached US$155.4bn in H1 2020 (361 deals), a 21% rise from the first half of 2019, marking the highest H1 volume on record.
  • The pandemic crisis had a significant impact on market dynamics this year with green bond issuance dropping to US$92.5bn in 1H20 from US$99.8bn in H1 19 while social bonds surged with US$38.5bn of new issuance in H1 20, up 351% on H1 19 volumes. Sustainability bonds also increased 23% year-on-year to US$24.4bn.
  • The majority of social and sustainability issuance was by European borrowers, with a total of US$98.5bn in H1 20 issuance, followed by North America with $30.1bn and North Asia with US$14.0bn.

Investor and market news

HESTA announces net zero goal by 2050

HESTA has announced a Climate Change Transition Plan which commits it to reducing the absolute carbon emissions in its investment portfolio by 33% by 2030 and going ‘net zero’ by 2050.

First State Super aims to reduce carbon intensity by 30%

First State Super announced plans to divest from thermal coal from October 2020 as part of its Climate Change Portfolio Transition Plan.

Australian Unity launches new green bond fund

Altius, the firm’s Cash and Fixed Interest team, will invest in green, sustainable and social bonds which target investments that help reduce carbon emissions.

Australia signs up to social impact investment plan

The country’s states and territories have committed to the Commonwealth State Project Agreement, a A$22.3m plan to tackle social problems including homelessness

EU reaches agreement on green recovery deal

The European Union agreed a landmark €1.82trln budget and COVID-19 recovery package, with 30% of the total spending targeting climate-related projects to be invested between 2021 and 2027.

As part of the budget a Carbon Border Adjustment Mechanism will be introduced by 1 Jan 2023.

BBVA issues green CoCo Bond

BBVA issued the first green contingent convertible bond (CoCo) by a financial institution, raising €1bn and attracting almost €3bn of bids from 225 orders.

SASB and GRI to collaborate on sustainability

The Sustainability Accounting Standards Board (SASB) and the Global Reporting Initiative (GRI) said they will work together to improve the sustainability disclosure landscape by providing compatible standards for sustainability reporting.

Investors call for ‘Paris alignment’ of KPI-linked bonds

Investors and SPO providers have addressed greenwashing concerns, calling for KPI-linked bonds to align with Paris Agreement climate targets.

Xylem Inc sells $1bn debut green bond

The U.S.-based water technology provider sealed its maiden green bond offering. The proceeds will fund Internet of Things (IoT) technologies, efficiency and circular economy products to lower water use.

 

Download a PDF version of this update: NAB sustainable finance update: July 2020

 

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