The Sustainable Finance Market Outlook 2H 2019 examines ongoing and new trends in sustainable finance, and expectations for the latter half of 2019. Below is an excerpt from the executive summary of the Outlook.
The sustainable debt finance market is growing in volume, scope and popularity. As the green, social, sustainable and sustainability-linked markets scaleup, the need for standardization increases. The thematic debt capital markets are entering a new, uncharted phase of regulation, which will become a make or break moment.
A new record set in 2019
Record volumes of sustainable debt came to market in 1H 2019 –and the first half of the year is typically quieter than the second. Even if issuance rates remain unchanged in the final six months of 2019, we expect to see at least $380 billion of sustainable debt finance in the year.
Green bonds recover
Green bonds made a comeback in 1H 2019, following a quieter 2H 2018 and a shift in market focus towards sustainability-linked loans. Green bonds came in all shapes and sizes –from a resurgence in residential solar securitizations in the U.S. to jumbo-sized green sovereign issuance in the Netherlands. Markets are scaling up and diversifying geographically, and in terms of sectors and bond asset classes.
Europe shines, Americas grow, Asia lags
Europe accounted for almost half of sustainable debt issuance in 1H 2019, driven by heightened activity in both corporate and government sectors. The Americas look on track to beat 2018, with steady issuance from mortgage giant Fannie Mae, and new entrants to the market –a sovereign green bond from Chile and a corporate green bond from the telecommunications firm, Verizon.
Sustainability-linked loans boosted by guidance
The rapidly emerging new product in the sustainable debt universe –sustainability-linked loans –will get a boost from the Sustainability Linked Loan Principles published in 1H 2019. The Principles will help bring consistency and transparency to the market.
Europe one step closer to a standard
The EU Sustainable Finance Technical Expert Group, a consortium of industry experts established by the European Commission, published final recommendations on a proposed EU Green Bond Standard. The guidelines set a clear trajectory for a voluntary standard, which the European Commission hopes will cement Europe’s position as the leading market for green bond activity.