A record $500 billion in impact bond issuance was added to the market in 2020 and a review by fixed income specialist Insight Investment suggests this could be “easily repeated” this year.
According to the report, government-related issuance made up more than half of 2020’s total at $260 billion.
Financial companies added $121 billion and was the first sector to exceed the $100 billion mark on an annual basis, while utilities issued $57 billion, a 19% increase on 2019.
Driven by the global response to Covid-19, the most radical increase in issuance was in social bonds, marking an almost nine-fold rise to $161 billion in 2020, up from $18 billion in 2019. Consumer staples and energy sectors fell back by 50% and 35%, respectively.
Most issuance during the year came from France at 18% of the overall total and twice that of the next nearest countries – Germany and the US – at roughly 10% each.
South Korea, Japan and China accounted for 12% of collective issuance. The UK ranked in 15th place but could gain impetus from the government’s plans to issue a ‘green gilt’, according to Insight.
Joshua Kendall, head of responsible investment research and stewardship at Insight Investment, however, warned investors of “greenwashing” as the Insight Investment report found that approximately 10% of impacts evaluated by the company received a ‘red’ score and 40% a ‘green’ score.
In 2020, green bonds remained the biggest impact bond category, at 53% of issuance, while sustainability-linked bonds increased by 67 % on 2019.
Separate research by Dutch asset manager NN Investment Partners published last year indicated that bonds linked to social themes had increased in popularity during the early stages of the Covid-19 pandemic.
Nordic bank SEB has forecast the green bond market to raise $500 billion this year.