Sustainable debt reaches $1 trillion

The total issuance of sustainable debt has now surpassed $1tr, according to data compiled by BloombergNEF (BNEF).

Sustainable debt can include quite loosely defined areas, but encompasses green, social and sustainability bonds and loans to projects that are regarded as making a positive environmental and social impact, as well as debt securities that react to the sustainability performance of the borrower.

“Reaching the $1tr milestone is a key moment for the sustainable debt market – if this market wasn’t already on the radar of major global investors, it will be now”, said Angus McCrone, chief editor at BNEF. “This is just the beginning – while it took twelve years to find the first trillion dollars of sustainable debt capital, it will take much less time to reach the second trillion.”

Green bonds debuted the sustainable debt market in 2007, and remain the most popular financing option, with green bond issuance totalling $788bn to date, representing 77 per cent of the sustainable debt market.

However the sector is seeing more innovation and an example is the sustainability-linked debt that Italian utility Enel issued in September. Enel has committed to boost the interest rate the bond pays if it fails to meet its own renewable energy generation targets.

“The sustainability-linked model is a crucial development for the sustainable debt market,” said Mallory Rutigliano, a green and sustainable finance analyst at BNEF. “The bonds and loans are considered sustainable not because of the use of proceeds, but because of how the borrower commits to making sustainability improvements. With the transition to a lower carbon economy and inclusive growth on the agenda of many major companies, the concept is gaining traction.”

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