CaixaBank opened the GSS primary market with a €1.0bn 4NC3 Social Senior Non-Preferred (SNP). The transaction only received modest demand (€1.5bn), but nevertheless set the tone for a conducive market which enabled rarer / esoteric issuers, such as Credito Emiliano, to complete transactions.

Most issuers opted for EUR currency (14 transactions; €11.1bn equiv.). Yet, the Sterling market did observe a notable resurgence (5 transactions, €2.8bn eq.) amid attractive levels and issuers efforts for currency and investor diversification. Senior issuance dominated supply (14 transactions), followed by four transactions in covered format which were predominantly Green (three transactions vs one Social). 

Although we saw a flurry of Insurance GSS Tier 2 deals in April (3 transactions; €1.8bn), there has not been any Tier 2 GSS from the banking sector since ANZ’s €1bn Sustainable Tier 2 in January.

The green format continued its dominance, accounting for 13 of the 19 GSS trades (€9.0bn equiv.), followed by six social transactions (€4.9bn) and with an absence of the sustainability format amid heavy preference for green or social.

GSS/S issuance activity picked up considerably in May, after three consecutive months of decline. 2023 year-to-date (YTD) total volume is up 42% year-on-year (YoY), representing 59% of 2022 total volumes. The increase in total volume has been driven predominantly by strong volumes in January and May.

Green issuance (c. €38bn) represents 80% of GSS/S issuance in 2023 YTD – continuing its longstanding dominance and in line with the past few years (c.75% for 2020 & 2021 and 85% for 2022) – while social issuance accounts for 18%. Sustainability represents just 2% with no issuance since February.

GSS/S issuance has been dominated by Senior transactions, with Senior Preferred (38%) being marginally higher than SNP (33%), followed by Covered (24%), along with small portion of GSS capital issuance (5%).

European Bank and Insurance GSS/S Supply 2022-2023 YTD

European Bank and Insurance GSS/S Issuance Breakdown 2018-2023 YTD

• EUR Senior: YTD GSS issuance is €29.7bn (+52% vs 2022 YTD), with total senior supply at €153.3bn (+33%); resulting in an increase of GSS as % of total issuance to 19% (2022 YTD: 17%).
• GBP Senior: YTD GSS issuance is £3.5bn (+536% vs 2022 YTD), with total senior supply at £20.3bn (+75%); resulting in an increase of GSS as a % of total issuance to 17% (2022 YTD: 5%). 
• EUR Covered: YTD GSS issuance is €11.9bn (+24% vs 2022 YTD), with total covered supply at €126.0bn (+11%); resulting in a small increase of GSS as a % of total issuance to 9% (2022 YTD: 8%).
• GBP Covered: YTD issuance is nil (2022 YTD: £0.5bn), with total covered supply at £8.8bn (-7%); resulting in GSS as a % of total issuance of nil (2022 YTD: 5%).

• BNP Paribas has announced that they will no longer provide any financing dedicated to the development of new oil and gas fields, regardless of the financing methods. Additionally, BNP has set new decarbonisation targets for the steel, cement and aluminium sectors.
• Standard Chartered have published a paper ‘Deepening Sustainability with DLT', alongside Singapore FinTech Association (SFA) exploring how Distributed Ledger Technology (DLT) can be used in supply chain payments for financial institutions and corporates. Additionally, the paper references a solution framework where various blockchain solutions were measured against a set of qualifying criteria to identify the most efficient set of sustainability outcomes.
• ABN AMRO have launched an Impact Funds Mandate which provides clients the opportunity to invest in companies whose aim is to positively impact people, planet and society. The selected investment funds all classify as Article 9 Funds under Sustainable Finance Disclosure Regulation (SFDR) and have sustainable investment goals as their objective. ABN have also lowered the entry threshold for impact investing from €2.5 million to €50,000 to make impact investing accessible for a wider group of investment clients.
• JPMorgan Chase has announced it intends to remove and store 800,000 metric tons of carbon dioxide equivalent (mtCO₂e) from the atmosphere by purchasing over $200 million in high quality, durable carbon dioxide removals (CDR). JPMorgan stated that this agreement supports to scale the growth of CDR technologies.
• Phoenix Group have published their Net Zero Transition Plan, that outlines a roadmap which is designed to decarbonise its investment portfolio, its supply chain and its operations. The plan is built on science-based targets and is aligned with the UK Government’s Transition Plan Taskforce (TPT) disclosure framework and guidance from the Glasgow Financial Alliance for Net Zero (GFANZ).
• Lloyd’s of London announced its resignation as a member organisation from the Net Zero Insurance Alliance (NZIA) with immediate effect on Friday. This makes it the tenth major insurance and reinsurance player to offer its resignation.

• State Street has launched a ‘Carbon Asset Servicing Solution’, as well as depositary services, which will provide the ability for asset managers, asset owners and other financial services institutions to integrate carbon-related assets into their portfolios.
• Schroders has announced the launch of Carbon Offset share classes, which will provide clients with the choice to offset carbon emissions associated with their underlying fund holdings. Schroders stated it will aim ensure that the offsets purchased will equate to the Scope 1 and 2 emissions of the portfolio companies attributable to the share class, and that all the offsets are linked to high quality offset projects. 

• The Network for Greening the Financial System have published their report on taking stock of emerging practices relating to climate transition plans and assessing the role of central banks and supervisors in relation to transition plans.
• International Capital Market Association (ICMA) and European Leveraged Finance Association (ELFA) have published a guide of Practical Recommendations for High Yield Sustainability-Linked Bonds (SLB). The guide sets out 10 recommendations addressing specific characteristics of high yield bond such as: redemption provisions, covenant provisions, shorter tenor, and higher representation of private companies, which has implications for disclosure and reporting.
• Eurostat have published a report ‘Sustainable development in the European Union — monitoring report on progress towards the sustainable development goals (SDGs) in an EU context, 2023 edition’. The report provides an overview of the progress towards the SDGs in the EU.

• S&P Global Sustainable1 have launched a new Nature & Biodiversity Risk dataset which will assess nature-related impacts and dependencies across a company's direct operations that can be applied at the asset, company, and portfolio level. This will help support companies, investors and entities to understand and mitigate nature related risks and impacts.
• Sustainalytics has launched its Low Carbon Transition Ratings. This is intended to provide a forward-looking science-based assessment of a company’s current alignment to a net zero pathway that limits global warming to 1.5 degrees. It will also help identify and manage transition risks, respond to global regulatory requirements and disclosure initiatives, build climate investment strategies, and advance engagement activities.
• ISS ESG and Qontigo have released its ISS STOXX Biodiversity Index Suite, which will help clients align portfolios with their biodiversity impact reduction goals. 

As always, if you would like to discuss any of the above further, please reach out to our authors:

• Caroline Haas, Head of Climate and ESG Capital Markets
• Doug Shuffman CFA, Vice President, Climate and ESG Capital Markets
• Jake Hallam, Associate, Climate and ESG Capital Markets
• Pulkit Khurana, Associate, Climate and ESG Capital Markets
• Siobhan Wartnaby, Analyst, Climate and ESG Capital Markets

*For any unfamiliar terms used within this article please refer to our Insights glossary.

[1] Includes European Bank & Insurance GSS/S Issuance

[2] Source: NatWest Markets Syndicate (31/05/23), includes Global Financial Institutions EUR & GBP Issuance.