Wed.
Sep 22
2021
sustainable debt
Image: Stanislav Kondratiev via Unsplash

In the first half of 2021, the issuance of sustainable debt doubled from the same period last year to reach $680 billion, Russia’s Vedomosti reported citing research by the Institute of International Finance (IIF).

Currently, global issuance of sustainability-linked bonds is on track to surpass $1 trillion this year.

A positive dynamic was also observed across developing countries, which account for less than 15 percent of global total sustainable debt.

In particular, Russia’s share in the total market increased to 1.9 percent in the first half of 2021, compared to 1.1 percent or $900 million a year earlier. The transition to ESG bonds has recently gained footing in Russia, whose economy relies heavily on oil and gas exports.

Although the share of non-residents in Russian corporate and sovereign bonds is decreasing, bonds for sustainable development promise to attract new types of investors. In effect, these investments might help support the Russian economy.

The issuance of green securities seeks to support the 2015 Paris Agreement that set a global goal to reach net-zero emissions in the second half of the century. In addition, the trend is supported by the growth of investments in low-carbon energy and technological innovation after the Covid-19 pandemic.

With corporations and financial institutions feeling the pressure from investors and regulators to up their ESG strategies, the issuance of environmentally friendly bonds emerges as the best option.

Additionally, the issuance of social bonds more than tripled year-on-year and reached $140 billion. This trend received significant support from the European Union’s introduction of Sustainable Finance Disclosure Regulation to impose mandatory ESG disclosures and additional pressure on non-complying companies.

Sales of sustainability-linked bonds also rose nearly fourfold to $60 billion, while sustainability bond issuance jumped to $90 billion in the first six months of this year.

Green bonds, used to finance climate-related or environmental projects, made up the lion’s share of all new issuances, at 35 percent. Countries like Germany, China and France emerged as the most prominent issuers.

Sovereigns, financial institutions and utilities dominate issuance, while companies from other directions of the energy industry, materials and consumer discretionary sector are also catching up.

Overall, the total size of the sustainable debt market is expected to surpass $3 trillion during 2021 and continue to snowball in the years to come.

By Dimitri Frolowsckii

Dimitri Frolowsckii is a political analyst and consultant.

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