Sustainability bonds saw record highs across SSAs, corporates, and FIGs, as issuers test the water with new types of debt.
Sustainability bonds hit record high in 2017
Stepping past the $100bn milestone this year, global sustainability bonds reached the highest YTD volume on record with $118.4bn. Year-on-year growth pushed volumes for such deals to record highs across all sectors in 2017 YTD: SSA doubled to reach $49.0bn, while corporate issuance jumped 74% to $40.4bn. At the same time, FIG issuers cemented their green bond issuance and came to market with $26.0bn so far this year, slightly up from $25.2bn in 2016 YTD.
New era for FIG green bonds?
In November, four banks chose the senior unsecured format to issue green bonds in various currencies, raising $3.6bn. Overall, banks have reached good results in terms of pricing for this combination. On the other hand, multiple insurance companies have tested the water with subordinated debt—in comparison to only one bank, Turkish bank TSKB.
With market participants expecting total loss-absorbing capacity (TLAC) issuance to rocket next year, combining green funding with TLAC or other capital requirement regulation may provide a good mix that satisfies issuers with lower yields and investors with environmentally friendly features.
Hybrid bonds on the rise in utility & energy
The euro-denominated corporate green hybrid bond market saw its debut deal from TenneT Holding BV (€1.0bn) in March. Last week, Iberdrola and Orsted A/S also issued such deals for renewable energy projects, raising €1.0bn and €500m, respectively. Notwithstanding prior green subordinated deals, corporates have only taken the step to issue green hybrid bonds this year. This adds to the momentum energized by FIGs, and highlights a trend that may see plenty of green growth in 2018.
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Data source: Dealogic, as of November 17, 2017