LONDON: Barclays Plc says it expects global sustainable bond issuance likely to rebound to record levels last seen in 2021, buoyed by debut issuers and a robust market for the green label.
The British bank has a combination of both established and repeat borrowers – particularly in the corporate space – lining up to sell bonds linked to environmental, social and governance (ESG) issues this year, according to Susan Barron, global head of sustainable capital markets at Barclays.
Green bonds, which had the busiest quarter on record, continue to be the anchor while global ESG bond issuance estimates for the year are broadly consistent with peak volumes seen in 2021, she added.
“Our pipeline is going to be busy across both corporates, financial institutions and the public sector,” Barron said in an interview.
“We are consistently seeing borrowers who haven’t accessed the market yet looking to work with us to try and find the best instrument that they can use.”
More borrowers are issuing labelled bonds to help fund their sustainable business practices and to capitalise on investor demand for the debt, with Europe, the Middle East and Africa the most active, according to the banker.
The size of investor orders is often higher for ESG bonds compared to conventional notes and the ability for the price to potentially tighten is greater, she added.
“In periods of market volatility, those two elements are equally as advantageous,” said Barron.
“But also there is very strong positive market appreciation for when a company does a green bond, which I recognise is difficult to quantify sometimes.”
The global sustainable debt market posted its first decline on record in 2022 as higher borrowing costs and heightened scepticism about the label turned borrowers away.
Sales of sustainability-linked bonds (SLBs) fell for the first time last year, after soaring almost 10-fold from 2020 to 2021.
The so-called SLBs are a nascent asset class that generally penalises issuers with higher borrowing costs if they don’t meet certain ESG goals. The label is still very important and “we’ll still see a lot of growth in it,” said Barron.
“I take it as a positive in the market, the fact that we’ve seen slightly slower issuance volumes as more issuers are spending more time with us and with others really working through the ambitiousness and materiality of both the key performance indicators and the sustainability performance targets,” said Barron.
The shift to a low-carbon economy is one of today’s “defining issues,” Barclays chief executive officer C.S. Venkatakrishnan said last month at the bank’s inaugural ESG conference.
Barclays plans to invest £500mil (RM2.5bil) in climate startups by 2027, as it targets US$1 trillion (RM4.5 trillion) of green financing by the end of the decade.
The bank has been involved in about 3.7% of the roughly US$195bil (RM870bil) issued in green bonds worldwide so far this year, making it the sixth-biggest underwriter of the debt, according to Bloomberg rankings. — Bloomberg
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