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What’s Happening in Sustainable Finance: GSSS Market Rebounds, Sovereign Sustainable Debt, and Much More

Posted on June 6, 2023


 

 

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Episode Summary

Hosts

  • Nicholas Gandolfo, Vice President, Corporate Solutions
  • Sabrina Tang, Sales Associate, Corporate Solutions

Is the Sustainable Finance Market Rebounding in 2023?  

In this month’s episode, Nick and Sabrina dig into the sustainable finance market’s rebound in Q1. Despite the market pressures caused by inflation and the banking shake-ups at UBS and Credit Suisse, sustainable finance activity saw an upward trend in the first part of the year. Although Nick and Sabrina stop short of making any predictions about where volumes will land by the end of the year, they do note some interesting dynamics in the market: green use of proceed bonds remain strong, social and sustainability focused bonds are down slightly, and sustainability-linked finance appears to be gaining some ground again despite continued market scrutiny.

Scrutiny Continues for Sustainability-Linked Bonds  

Despite the rebound in sustainability-linked bond (SLB) activity in Q1 this year, concerns remain about this sustainable debt instrument. Several recent articles and reports discuss the credibility of SLB targets, whether coupon rates offer enough of a penalty if targets are missed, and whether the performance targets and indicators have an impact on sustainability. 

There’s also some media coverage on SLB issuers missing their stated sustainability performance targets. Although not ideal, missed targets among SLB issuers could be viewed as a sign of their ambition rather than an indication of something being fundamentally wrong. For issuers considering sustainability-linked debt instruments and seeking additional guidance, check out the latest market references from Climate Bonds Initiatives (CBI).

The Sustainable Sovereign Debt Club Continues to Grow

CBI’s 2022 market summary highlights the growth of sovereign bond issuances. This is great to see because sustainable debt from sovereigns catalyzed the market in many cases. Sabrina highlights the recent activity from Turkey, Austria, Italy, and Cyprus as well as the sovereign green bond program being considered by the Australian government. In addition to more countries seeing the opportunities in sustainable debt instruments, regulators across a growing number of jurisdictions are ramping up sustainable finance activities in their countries. Developments are ongoing in India, Indonesia, Malaysia, Sri Lanka, Japan, and Vietnam to name just a few.     

Key Moments

0:01:16Market overview
0:02:07Q1 Market overview
0:03:35CBI 2022 state of the market report
0:05:22Continuing SLB scrutiny
0:06:46Climate transition plan transparency
0:08:34More updates to the EU taxonomy
0:09:34Additional articles and reports to read (see links below)
0:11:34SLB and SLL overview
0:14:15Audience questions
0:18:14Green bonds overview
0:21:13Green loans overview
0:22:30Social bonds and loans overview
0:23:25Labeled products, transition bonds and regulatory updates

 

Links to Select Resources

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