Joshua Kendall
A record $234bn in green bond issuance was added to the market in 2019, an increase of more than 50% on the $150bn issued in 2018. While issuance in 2018 and 2017 was relatively flat, 2019 saw a significant jump up in issuers joining the market, when compared to previous years. This watershed moment marks a turning point in the depth of opportunities available to investors, according to Insight Investment, a leading asset manager.
The core sectors for these instruments – financials, governments, utilities, energy and industrials – all experienced significant growth in issuance with financials leading the charge, adding more than $78bn in green bonds over the course of the year. Diversity improved with the telecommunication sector now part of the market. The Netherlands issued its inaugural green bond in 2019 and Germany said it intends to issue a green bond later in 2020.
Josh Kendall, senior ESG analyst at Insight Investment, said: “Green bond issuance in 2019 reached record levels, deepening the universe to more than $747bn. This strong momentum in support of climate transition indicates a turning point for investors. We expect 2020 to be another record year for green bonds with early indications suggesting a total close to $300bn in issuance.”
Bruce Murphy, Insight Investment Director of Australia and New Zealand, said: “We hope to see increased issuance of green bonds from Australian corporates in 2020. Its issuance last year remained largely level with 2018 ($4.5bn in 2019 vs $4.3bn in 2018), which suggests issuers may be missing out on the swell of demand from a global investment community actively seeking diverse and impactful opportunities. A deeper investable universe will help speed the transition to a low carbon economy and hopefully create jobs and boost productivity along the way.”
>Social and sustainable impact bonds issuance increased, adding $35bn in 2019, which, together with green bonds, brought total issuance of impact instruments over the year to almost $300bn ($299.8bn). The market also saw the evolution of new types of impact instruments, for example Enel’s transition bond, which may present a model for further issuance from petroleum companies in 2020.
Kendall said: “The overall growth in impact instruments is encouraging but in too many instances we are finding that the targets set out by issuers lack conviction and ambition. We want to see far more attention paid to the quality of the underlying propositions. Insight has awarded ‘green flag’ status to only 27% of the more than 120 impact bonds we have reviewed. This is because the market still struggles with transparency reporting and a clear demonstration of positive impact.”
Insight Investment manages A$30 billion for Australian investors and A$1.2 trillion globally[1].
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