11 June 2021
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2 min read
Green bonds can be used to finance green energy projects | Source: Iberdrola
Latest figures from BNEF reveals record levels of demand for social bonds, as green investment flows continue to accelerate
Sustainable debt has surpassed the $3tr mark after record levels of social bonds were issued for projects designed to allay the impacts of the coronavirus pandemic, according to the latest data from BloombergNEF.
Figures published by the influential analyst firm yesterday highlight the rapid growth rate of the sustainable investment market over the past year, with more than a trillion dollars borrowed for environmental, social and governance (ESG) purposes over the last eight months alone.
The achievement marks a dramatic acceleration for the once-niche investment sector, which took 12 years to reach its first trillion dollars and less than two years to hit $2tr, BNEF said.
Maia Godemer, sustainable finance associate at BNEF, said much of the recent growth was due to an expansion in social borrowing over the last 12 months, which soared by 720 per cent in 2020 to hit $150bn.
"The rapid explosion of social bonds stems from the need to alleviate the impacts of the Covid-19 pandemic on societies around the world," she said. "The growth has been driven by expected players such as government agencies and supranationals, but it remains to be seen how corporates will keep up and adopt this market".
Social borrowing has continued to accelerate during 2021, with some $128bn brought to market for social projects in the first five months on the year, BNEF said.
The market for sustainability-linked loans, green bonds, and sustainability bonds is also growing exponentially, rising by 253 per cent, 142 per cent, and 320 per cent respectively in the first five months of 2021 from the same period in 2020, according to the analysis.
"Green bonds are the largest and most longstanding theme in the sustainable debt market, but the universe of sustainability flavours is now rapidly becoming more balanced," said BNEF sustainable finance associate Mallory Rutigliano. "Social and environmental themes are each making up large components of the market, and borrowing tied to sustainability targets, known as sustainability-linked debt, continues to grow alongside that for specific ESG projects."
