Driving ESG bond markets to new heights
22 February 2021
The environmental, social and governance (ESG) debt market had an eventful year in 2020 with the pandemic spurring the growth of social bonds and increased issuance of other types of sustainable debt. BBVA was also the first private institution in Europe to issue a Covid-19 bond, setting the precedent for others to follow.
Patricia Cuenllas and
Michael Gaynor review the events of 2020 and assess what this means for the year ahead
Environmental Finance: One of the big trends for ESG bonds in 2020 has been the proliferation of social bonds. What has driven this trend and are social bonds here to stay?
Feb 14, 2021
Chanel is one of a number of companies to issue sustainability-linked bonds
When luxury fashion brand Chanel issued €600 million of bonds last September, there was an unusual catch: if the company fails to meet its sustainability goals, it will have to pay penalties to investors.
The deal is an example of a new type of debt known as a sustainability-linked bond, which is a way for businesses to finance themselves while tying repayments to their sustainability targets. That is different from traditional green or sustainability bonds, where the money raised has to be spent on a specific green or social project.
Innovative issue is the first sustainability-linked bond of its kind in Asia
4 Feb 2021 |
Chito Santiago
Surbana Jurong Group, a Singapore-based global urban, infrastructure and managed services consulting firm, on February 3 priced a S$250 million (US$186.60 million) sustainability-linked bond, representing the first Singapore dollar-denominated sustainability-linked bond and the first public sustainability-linked issuance from a Southeast Asia-based company. This is also the first Asian sustainability-linked bond to feature a premium step-up at maturity.
The unrated 10-year deal was priced at par with a coupon of 2.48%, or a spread of 132bp over Singapore dollar swap offer rate (SOR). With the sustainability-linked structure, Surbana Jurong was able to further expand and diversify its investor base as the deal was more than six times oversubscribed, attracting an order book in excess of S$1.7 billion. Several of the institutional investors participating in this offering are
The International Capital Market Association ( ICMA ) has published its much anticipated Climate Transition Finance Handbook
1 (the Handbook ). Unlike previous releases, the Handbook does not comprise a formal set of Transition Bond Principles , nor seek to create a distinct asset class of transition bonds , but rather seeks to give guidance to issuers on devising and evidencing their overarching sustainable transition strategies and the bonds they issue to achieve them. The Handbook can be used in conjunction with the existing sustainable finance principles.
2020: the year for transitioning issuers
2020 has been another evolutionary year for sustainable finance in spite of market volatility mainly brought about by the fall out of the COVID-19 pandemic. This year the sustainable bond market opened up to a new class of issuer – the climate transitioning issuer. These are issuers who are at a point further away from having a business model consistent with the Paris Agreement t