This article was written by Caleb Mutua. It appeared first on the Bloomberg Terminal.
The global sustainable bond market had its busiest February on record, driven by large deals from governments and a string of debut transactions from big corporations.
New sales of green, social, sustainability and sustainability-linked debt reached $87.75 billion last month, making it the most active February since green bonds first emerged in 2007, according to data compiled by Bloomberg. The borrowing blitz follows an even busier January, when over $115 billion was raised.
Green bonds accounted for more than half of the total of February’s sales at $49.2 billion, a slight drop from roughly $54 billion in January.
“The strong monthly issuance leads us to expect another strong year of issuance in the face of high inflation, rising rates (especially in US and Europe) and potential recession risks,” Bloomberg Intelligence analyst Christopher Ratti wrote in a note on
Monday.European Investment Bank — the first institution to issue a green bond — was the biggest issuer of green debt last month, raising over $11.5 billion across different transactions and currencies, Bloomberg-compiled data shows. Meanwhile, Comcast Corp. priced $1 billion in its debut green bond and is planning to make the debt part of its long-term plan to raise capital.
Sales of sustainability bonds, whose proceeds can be used to fund both environmental and social projects, fell 19% to $23.32 billion in February, from over $28 billion in January.
Issuance of social and sustainability-linked bonds also fell last month. Notable deals include Nokia Oyj’s €500 million ($529.1 million) debut SLB, which received orders of over €2 billion, and a four-billion euro social bond from French agency Cades.
Structural demand
Morgan Stanley is receiving more questions from high-yield and leveraged loan funds as issuers continue to provide more ESG data and there are proposals to European regulation that would drive demand if implemented, strategists led by Carolyn Campbell wrote in a note on Monday.
Roughly 25% of high-yield issuance in Europe is ESG-labeled with banks dominating in green junk deals, they wrote. Meanwhile, labeled debt in the US junk market is relatively small but rising.
“There is structural demand for the outstanding ESG-labeled high-yield/loan issuance, while high funding costs and an uncertain growth outlook should limit leveraged credit issuance, including labeled debt, in the near term,” wrote the strategists.
Bloomberg
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