FIG and corporate ESG bonds boom in January sales

IFR 2419 - 05 Feb 2022 - 11 Feb 2022
3 min read
Julian Lewis

A January boom has seen ESG financial and corporate bond sales increase 60% from a year earlier, according to Refinitiv data. Although new global green, social, sustainable, sustainability-linked and transition issues fell slightly overall compared with January 2021, both Moody’s and Natixis forecast record volume in 2022.

January brought US$84.5bn of ESG bond sales globally, Refinitiv data show, a 7% decline from US$91.2bn a year earlier.

But the headline figures disguise notable shifts at a sector level. January SSA sales plunged 44% to US$33.2bn this year as sovereigns stayed out of the market. Only Chile was active, with a US$3bn two-parter. A year earlier the European Union, Hong Kong SAR and Ontario all joined the Latin American sovereign.

Supranationals also held back their ESG offerings. January 2021’s raft of offerings from the European Bank for Reconstruction and Development, International Finance Corp and World Bank was whittled down to a solitary pair from the latter name and the Nordic Investment Bank.

In contrast, corporate ESG bonds were up by almost two-thirds, hitting US$30.9bn compared with US$18.9bn a year earlier.

The volume of ESG bonds slipped from companies in consumer products, telecoms and technology but other sectors more than compensated. The largest area, energy and power, also saw the largest rise: 180% to US$12.7bn.

Highlights included a debut green bond from French transmission network operator Reseau de Transport d’Electricite, and Chile’s Sociedad de Transmision Austral, Ireland’s ESB and Southern California Edison were among other electricity issuers.

The materials sector also rose nearly 140% to US$2.4bn and real estate increased 80% to US$7.3bn – maintaining its ranking as the largest area of corporate ESG bond sales after energy.

ESG bonds from financial issuers also soared despite a dry period later in the month. Global sales rose 56% to US$20.4bn, up from US$13.1bn a year earlier.

This activity included new sales of senior preferred, senior non-preferred and Tier 2 debt in ESG formats. Notable transactions included a 10-year non-call five sustainability Tier 2 from Korea’s Hanwha Life Insurance, while green SNP issuers included Argenta Spaarbank, BPCE and OP Corporate Bank.

Intermediate Capital Group offered a rare SLB while Malaysia’s CIMB Bank brought a debut Sustainable Development Goal issue.

Records in prospect

Notwithstanding January’s overall decline, Moody’s ESG Solutions forecasts 2022 sales will reach an unprecedented US$1.35trn compared with just under US$1trn in 2021, according to Refinitiv data.

The ratings firm expects green bonds, the longest established ESG product, to contribute US$775bn to this year’s total with the remainder comprising US$225bn of sustainable bonds, US$200bn of SLBs and US$150bn of social bonds.

That prediction would take ESG bonds towards 15% of total global bond volume this year, said Matthew Kuchtyak, vice president for ESG outreach and research at Moody's.

Natixis expects corporates and financials to drive an 18% rise in euro ESG bond sales to €450bn.