Sustainable Finance Insights on Transition Finance, Sustainability-Linked Bonds, Sovereign Bonds and More

Posted on June 23, 2021

 

 

 

 

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Episode Summary

Hosts

  • Nicholas Gandolfo, Director, Corporate Solutions
  • Marika Stocker, Senior Manager, Corporate Solutions

In this episode, Nick and Marika discuss the bustling labeled bond market and its ongoing diversification in terms of the types of issuers, geographies, the use of proceeds and products. As the year rolls on, the sustainable finance market continues to produce strong volumes in terms of the number of transactions and their value. They also highlight developments around transition finance guidance as well as new and updated principles in the loan market. As always, they take a couple listener questions, this time focused on how bonds are labeled and the emergence of combined instruments.

Sovereign Activity in the Bonds Space

Activity in the labeled sovereign bond market looks to be heating up for 2021. Several nations including Russia, Canada, Hungary, UK are considering issuing sustainable sovereign bonds. We’ll keep an eye on this space to see which countries come to market with green, social or sustainability sovereign bonds.

Transition Finance

More is being written about transition finance and whether sustainability-linked bonds (SLBs) have taken their place in the market. No doubt SLBs have come on strong, but we see diversification, especially with respect to product, as important for overall market health. Nick notes some of the challenges that could account for the low number of labeled transition finance thus far but anticipates that in time we will see more transition bond issuances. Nick also highlights two transition-focused reports worth checking out - The Transition Pathways Initiative’s annual ‘State of Transition’ and Natixis’ ‘Transition Tightrope’ series.

Continuing Momentum of SLBs

On the SLB front, the segment continues to grow. Transactions beget more transactions as borrowers and lenders gain confidence in the instrument. While some observers have doubted a handful of issuances due to questions around the materiality, relevance and ambitiousness of their sustainability performance targets and KPIs, the scrutiny is ultimately good and will raise the caliber of SLBs coming to market.

Key Moments

00:09 Introduction
00:55 Market news
02:20 TPI “State of Transition” report
03:05 Ongoing developments in China
03:55 Transition bonds vs SLB?
05:07 Natixis “Transition Tightrope” report series
05:40 EU Taxonomy developments
06:31 Social Loan Principles released
07:07 ELFA/LMA - ESG considerations in leveraged loan paper
08:11 Bond issuance overview
13:21 Loan transactions overview
14:18 Sustainability-linked bonds overview
18:54 Listener questions
22:31 Sustainability-linked loan overview
27:04 Transition bond overview
29:01 Regulatory updates


Links to Select Resources