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Social bond issuance may approach $100B in 2020 – S&P Global Ratings

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Social bond issuance may approach $100B in 2020 – S&P Global Ratings

The global sustainable debt market could hit a record $500 billion in 2020 as the coronavirus pandemic brought a rapid increase in interest in social justice by corporate and sovereign issuers, S&P Global Ratings said in a report.

Total issuance of social bonds stood at $71.9 billion as of October, up nearly 4x from 2019, and could approach $100 billion by the end of 2020, S&P Global Ratings said. The rating agency said it has observed "growing investor interest in funding social projects that address rising unemployment, income inequality, and strains on housing, health care, and education systems."

Total sustainable debt could rise to $500 billion in 2020 from $341 billion a year ago, partly because of the rapid rise in social bond issuance, the rating agency added. A recent example is the EU's issuance of a €17 billion social bond, which is the second-largest issued in history and was 13x oversubscribed by investors. Proceeds of the social bond will be used to fund a job support program.

"The increase in demand is likely to be met with greater supply from a wider range of issuers to fund a variety of projects — involving, for instance, access to safe and affordable housing, improvements to public health infrastructure, and employment or income generation — that will probably take a permanent spot in the capital markets," S&P Global Ratings said of the social bond.

Global corporate debt issuance

The total amount of global corporate debt rated by S&P Global Ratings reached $21.8 trillion as of Oct. 1, increasing 6% from the start of the year, the rating agency said in a separate report. Issuance in the first three quarters of 2020 has already exceeded full-year total volumes of the past two years.

The amount of global investment-grade debt increased by 5% year-to-date to $16.8 trillion, while speculative-grade debt rose by 9% to $5.03 trillion as companies built up cash reserves and raised the amount of available debt funding to cover unexpected revenue declines amid the coronavirus pandemic, S&P Global Ratings said. Only about 50.3% of issuers are rated investment grade, with the remaining rated speculative grade.

U.S.-based issuers accounted for the largest share of rated debt with $10.63 trillion, followed by Europe with under $7.9 trillion. Emerging market corporate debt came in at $1.32 trillion, or only 6% of rated debt globally, S&P Global Ratings said, noting that a substantial share of the region's overall outstanding debt is unrated.