ESG Financing

Global sustainability bond & loan volumes (EUR b) H1 ’21 volume has surpassed total 2020 volume

H1 21 volumes by industry LMA has published updates Sustainability Linked Loan Principles

ESG Financing - Market observation per 23 August 2021 -

Sustainable finance is approaching a new milestone

  • In Q1 & Q2 ’21, sustainability linked loans dominate refinancing activity as ESG factors are high on the strategic agenda of both borrowers and lenders
  • 2021 global ESG bond and loan issuance is rapidly approaching the USD 1trn milestone, after volumes have surpassed 2020 levels already in July ‘21
  • Approximately 50% of corporates recently surveyed by Treasury Today does not actively use green bonds nor sustainability linked loans/RCFs. 20 – 30% of respondents indicate they are planning to use sustainable instruments in the near future and 25% already have instruments in place
  • We expect the focus on ESG to continue. Sustainable debt is issued at a premium (the so called ‘greenium’) which makes it even more attractive for corporates. It is no longer the question why a corporate should issue ESG financing, but rather why a corporate does not issue sustainable debt

Banks and investors are cautious about quality of ESG debt

  • Just after publication of previous Zanders Debt Market Update, the LMA has published a revision of its Sustainability Linked Loan Principles (SLLP)
  • Amendments emphasize that SLL’s core purpose is promoting ESG compliant activity performed by corporates and reduce appearance of sustainability washing or misuse of the instrument
  • Key revision is that KPIs must be material to challenges faced by the industry. Furthermore, KPIs and Sustainability Performance Targets (SPTs) are benchmarked against industry standards and peers
  • To increase transparency, post-signing verification becomes a necessity and public reporting of SPTs is encouraged