What’s Happening in Sustainable Finance: Market Expectations Rise, Green Bonds Continue to Flourish, and Biodiversity Climbs Up the Agenda

ESG in Conversation

Episode Summary Hosts

• Nicholas Gandolfo, Director, Corporate Solutions
• Aditi Bhatia, Regional Sales Manager, Corporate Solutions

In this episode, Nick and Aditi discuss hot topics in sustainable finance. As the global green, social, sustainable, and sustainability-linked market continues to thrive, our hosts take note of the growing variety in use of proceeds, the debate around sustainability-linked bond penalties, and an eyebrow-raising new SLB issuance from Philip Morris International.

Sustainable Bond Market Reaches Half a Trillion in 2021

The Climate Bonds Initiative (CBI) reported that total labelled bond issuances (green, social, sustainability, transition and sustainability-linked) hit the half trillion mark in the first half of the year. That’s a 59% increase compared by 2020. For the green bond market specifically, CBI predicts annual volumes will reach $1 trillion by 2023. Other trends noted in the report are the continued growth of social and sustainability bonds, with social bond volumes quadrupling in H1 and sustainability bonds increasing 20%. The volume of sustainability-linked bonds also continued to soar in 2021. Transition bond issuances, on the other hand, are still struggling to gain traction.

Biodiversity on the Agenda

Nick notes that biodiversity continues to draw the attention of investors and issuers globally, with a growing number of reports and articles on the topic. This year also saw the UN Convention on Biological Diversity, or COP 15, wrapping up in China, and the launch of the Task Force on Nature-related Financial Disclosures over the summer. In the world of sustainable finance, we think biodiversity-related targets and use of proceeds will likely become more prominent within linked instruments and labeled bond issuances.

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Key Moments 00:02:50 Market overview 00:02:52 CBI report on H1 2021 00:04:36 Tier 2 subordinated debt 00:05:28 Greenwashing debate 00:06:33 SLBs and questions about penalties 00:07:05 Biodiversity 00:08:02 Nuclear 00:09:18 Philip Morris SLB 00:10:06 CBI report on Latin America 00:10:44 CBI annual conference 00:11:53 Green bonds overview 00:21:35 Social loans overview 00:22:58 Green loans overview 00:24:23 SLB overview 00:27:57 Audience questions 00:30:09 SLL overview 00:31:47 Transition bonds overview

Links to Select Resources

• Climate Bonds Initiative: Sustainable Debt Highlights H1 2021
• Asian Investor: Do Fears of Greenwashing Outweigh the Evidence?
• Bloomberg: ESG Financing Comes With Few Penalties for Missing Goals
• Environmental Finance: French Financial System 'Significantly Exposed' to Biodiversity Risk
• European Scientist: Kazakhstan Banks on Nuclear Energy For Transition to Low-Carbon Future
• Climate Bonds Initiative: Latin America & Caribbean: Sustainable Finance State of the Market 2021
• Climate Bonds Initiative: Climate Bonds Conference21 Videos
• Climate Bonds Initiative: Transition Finance for Transforming Companies discussion paper
• Sustainalytics SPOs:
  • Isle of Man Sustainability Finance Framework Second-Party Opinion
  • Grupo Aeroportuario del Pacífico Green Financing Framework
  • Verizon Green Financing Framework
  • Axis Bank Sustainable Finance Framework Second-Party Opinion
  • California Housing Finance Agency Social Bond Framework for the Purchase and Financing of Citibank, N.A. Affordable Housing Loans
  • Bosam Social Bond Framework
  • Rumo S.A. Sustainability-Linked Finance Framework
  • Lilly Sustainability Bond Framework
  • Vodafone Sustainable and Sustainability-Linked Finance Framework Second-Party Opinion
  • CEMEX Sustainability-Linked Financing Framework Second-Party Opinion

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