Global issuances of sustainable debt such as green bonds and sustainability-linked loans skyrocketed in 2019 to $465 billion, up 78% from $261.4 billion in 2018, BloombergNEF said in Jan. 8 news release.
"The steep increase is fueled by end-investors' concerns about the threat of climate change, and the desire of many big company, bank and government leaders to be seen as behaving responsibly," BNEF lead sustainability analyst Jonas Rooze said in a statement.
The cumulative sustainable debt market reached $1.17 trillion by the end of 2019, but those specialty products comprise only a small portion of the total market. For example, new bond issuances globally totaled $3.3 trillion over the first half of 2019, according to S&P Global Ratings. On a regional basis, Europe makes up 53% of the global sustainable debt market.
As in recent years, green bonds continued to dominate the sustainable debt market with $271 billion issued, up from $182 billion in 2018. Green bonds are generally similar to standard bonds except that their proceeds are dedicated entirely to existing and new environmentally friendly projects such as renewable generation.
Sustainability-linked loans, in which the rate is tied in some way to the borrower's performance on environmental, social or governance criteria, have grown to be the second most popular thematic debt product, BNEF said. Volumes of sustainability-linked loan issuances increased by 168% to $122 billion in 2019.
Comprising a smaller portion of the total, sustainability bond issuances accounted for $46 billion of the total for 2019, which BNEF said was almost a threefold volume increase. Among them was a new kind of sustainability bond that emerged when Enel SpA issued a $1.5 billion general-purpose, sustainability-related bond connected to the company's ability to meet a future renewables target expansion.
As for other noteworthy events and market participants, Royal Dutch Shell PLC signed a $10 billion sustainability-linked loan in December 2019 connected to its progress on reaching a short-term net carbon footprint intensity target. Fannie Mae used the sustainable finance market to securitize $22.8 billion in mortgages, BNEF said. And the governments of the Netherlands and France together issued $13.3 billion in sustainable debt.
BNEF expects to publish a more in-depth review of the sustainable finance market in a report within a few weeks.