Green, Social and Sustainability bonds market 2021 outlook: The new sustainable borders

2020 was another strong year for the Green, Social and Sustainability bonds market. In 2021, Crédit Agricole CIB's experts see a continuation of this momentum.

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2020 was another strong year for sustainable finance, mostly supported by the issuance of social bonds and the rise of Sustainability-linked bonds. It was driven by 2 main factors:  the Covid-19 crisis, which has highlighted the need to develop resilience to risks and shocks, including those related to climate and the environment, and the climate neutrality commitments, which are spreading in several countries, with some already backed by investment plans. 

In 2021, Crédit Agricole CIB sees a continuation of this momentum. According to Damien de Saint Germain, Head of Credit Research & Strategy at Crédit Agricole CIB:We expect the green, social and sustainability supply to accelerate in 2021. We estimate that it could reach EUR600bn, an increase corresponding to 55% as compared to the amount issued in 2020.”

 

Evolution of Green, Social and Sustainable Bonds issuance volume and 2021 forecast:

Evolution of Green, Social and Sustainable Bonds issuance volume and 2021 forecast:

*Cumulated issuances as of end of November 2020 and published in Crédit Agricole CIB ESG 2021 Outlook on December 16th, 2020
Source: Bloomberg, Crédit Agricole CIB

This growth should be largely helped by both individual European countries and the EU which could issue EUR140bn in sustainable supply though green and social bonds according to our estimations. Agencies and supras should remain the larger source of supply with large names shifting the majority of their issuance to a sustainable format.

On the product side, the diversification is expected to continue with Sustainability-linked bonds and Sustainability bonds which could account for around 20% of the sustainable supply. Sustainability-linked bonds and Transition bonds can bring new issuers and sectors on board. And the issuances in EUR are still expected to account for 60% of the coming supply.

Forecast of Sustainable bonds distribution by issuer type and product in 2021:

Forecast of Sustainable bonds distribution by issuer type and product in 2021:

According to Tanguy Claquin, Global Head of Sustainable Banking: “The development of sustainability-linked instruments, the emergence of social bonds alongside green bonds and the upcoming EU Taxonomy regulation are strong trends and excellent news in sustainable financial markets. Issuers now have in hand a range of instruments responding to different responsible investment strategies and we will continue to advise them in their Sustainable journey.

With 6.5% market share at the end of 2020 (Bloomberg), Crédit Agricole CIB is one of the leaders of the Green, Social and Sustainability bonds market. In  2020, the Bank  was bookrunner for more than 100 benchmark transactions, amongst them Germany's inaugural Green Bund, EDF's first Green Convertible Bond, Suzano's Inaugural Sustainability-Linked Bond as well as numerous pandemic related bonds (e.g. UNEDIC, European Union issues).Crédit Agricole CIB has a long-term commitment to promote green finance with a consistent organisation across the teams, from origination to distribution.