March saw most issuers opt for EUR currency (4 transactions), whilst Intesa Sanpaolo accessed the GBP market for currency and investor diversification and Sumitomo Mitsui Trust Bank opted for a USD-denominated 5Y 500m Green bond; in line with their previous green bonds.

Senior format dominated supply with five transactions, whilst Stadshypotek re-opened the FI GSS market with a low beta 5yr covered green bond. GSS capital issuance remained nil, with no issuance anticipated for the near future.

The green format continues to be the label of choice for FI’s, with five GSS transactions in green format, followed by one in social format from NatWest Group.

GSS/S issuance registered a modest 4% year-on-year (YoY) growth in March which was largely impacted by increased volatility amidst high-profile bank rescues. However, 2023 year-to-date (YTD) total volume still stands strong; up 53% YoY, representing 36% of 2022 total volumes, given exceptionally strong volumes in January.

Green GSS/S issuance (c. €24bn) represents 83% of GSS/S issuance in 2023 YTD. This represents a continuation of its longstanding dominance and aligns with activity from recent years (c.75% for 2020 & 2021 and 85% for 2022). Social issuance accounts for 14%, which is marginally up on 2022 (12%) with Sustainability at 4%.

GSS/S issuance has been well split between Senior Preferred (39%) and Senior Non-Preferred (35%) followed by Covered (24%), along with small tail of GSS capital issuance (2%)

Source: Dealogic (31/03/23)

Source: Dealogic (31/03/23)

• EUR Senior: YTD GSS issuance is €19.6bn (+53% vs 2022 YTD), with total senior supply at €101.6bn (+53%); resulting in GSS as a % of total issuance of 19%, which is the same as 2022 YTD.
• GBP Senior: YTD GSS issuance is £1.1bn (+340% vs 2022 YTD), with total senior supply at £14.3bn (+68%); resulting in an increase of GSS as a % of total issuance of 8% (2022 YTD was 3%).
• EUR Covered: YTD GSS issuance is €7.6bn (+96% vs 2022 YTD), with total covered supply at €89.3bn (+18%); resulting in an increase of GSS as a % of total issuance of 8% (2022 YTD was 5%).
• GBP Covered: YTD issuance is nil (2022 YTD: £0.5bn), with total covered supply at £5.8bn (-20%); resulting in GSS as a % of total issuance of nil (2022 YTD was 7%).

• Commerzbank becomes first German bank with SBTi-validated emissions reduction targets. The Science Based Targets initiative (SBTi) has validated the Bank’s near-term emissions reduction targets for 2030. In September 2020, Commerzbank became the first German bank to commit to setting science-based targets through the SBTi.
• Deutsche Bank has increased its target for ESG financing and investments to €500bn between early 2020 and the end of 2025, after exceeding its initial target of €200bn by 2022 by €15bn. To meet its new target, the bank will: (1) convert traditional supply chain financing of international companies to a supply chain financing linked to environmental and social criteria; (2) provide at least €3bn in ESG financing for developing economies and emerging markets by the end of 2025; (3) supply between €7bn and €10bn in financing for energy efficient homes by the end of 2025.
• TD Bank Group has launched a new Sustainable & Decarbonisation Finance Target to support its customers, clients and the communities it serves, by aiming to mobilise $500bn CAD by 2030. The CAD will be mobilised via financial activities that include lending, financing, underwriting, advisory services, insurance, and the Bank's own investments. In 2017, TD was the first major Canadian bank to set a financial target of $100bn CAD to be deployed by 2030 toward low-carbon lending, financing, asset management and internal corporate programs. In 2022, the Bank achieved this target.
• CIBC announced a new sustainable finance offering in collaboration with Export Development Canada, to help support export-oriented Canadian businesses transitioning towards more sustainable business operations. The Sustainable Finance Guarantee pilot program is a risk-sharing solution aimed at helping with lending activities that contribute to decarbonising the economy and will provide up to $1bn in financing over the next three years.
• UniCredit and Eni have announced their partnership around Open-es, an ecosystem initiative that seeks to enhance cross-business collaboration and support companies in measuring and improving their ESG performance. UniCredit will act as a value-chain lead partner in this alliance, thereby playing a strategic role in the sustainable development of the Italian corporate sector.
• Munich Re has discontinued its membership of the Net Zero Insurance Alliance (NZIA). Munich Re views the opportunity to pursue decarbonisation goals as a collective approach among insurers worldwide, without exposing themselves to material antitrust risks, as extremely limited. As such, they believe that it’s more effective to pursue their climate ambition to reduce global warming individually.

• TD Asset Management has expanded its sustainability suite with the launch of the TD North American Sustainability Bond Fund, its first actively managed environmental, social and governance related fixed income product. The launch follows the rollout of the TD North American Sustainability Equity Fund and TD North American Sustainability Balanced Fund, in September 2020.
• Schroders has announced the launch of Schroders Capital Climate+ LTAF, a long-term asset fund designed to help UK pension fund investors support the net zero transition. The strategy will aim to invest across four long-term themes: climate mitigation, climate adaption, biodiversity / natural capital and social vulnerabilities.
• Blackrock have published their engagement priorities for 2023. The release outlines the key themes identified by the firm as sources of material risk or opportunity that will form the focus of its engagements with companies this year and in continuing its efforts towards sustainability-focused topics.
• Robeco has launched a Sustainable Senior Loan Fund (SLF), its second closed ended private debt fund and one of the first to credibly integrate sustainability into private debt investments.

• The UK government has launched a raft of key announcements on green finance, net zero and energy security. In particular, the green finance strategy which aims to harness the UK’s ‘world-leading’ financial services sector to support climate and environmental objectives.
• The Bank of England has reported on climate-related risks and the regulatory capital frameworks. The report includes updates on capability and regime gaps, capitalisation timelines, and areas for future research and analysis.
• The European Commission has proposed the Net Zero Industry Act which intends to scale up manufacturing of clean technologies in the EU and ensure the EU is well-equipped for the clean-energy transition.
• The European Central Bank and the European Supervisory Authorities have called for enhanced climate-related disclosure requirements for structured finance products, to help investors identify the potential climate-related risks.

• MSCI is set to downgrade c. 31,000 funds as it works through a major overhaul of its methodology, in response to feedback from market participants.
• UN Principles for Responsible Investment (PRI) have published an extensive breakdown of the difference between ESG in credit ratings and ESG ratings.
• ERM has published a report that ranks ESG ratings agencies. The report finds that, while demand is surging, raters face rising concerns from corporates and investors around data accuracy and the overall quality and usefulness of ESG ratings.
• S&P have published their first global sustainability quarterly report of 2023, which provides insight into the sustainable bond market and the challenges surrounding it.
• The FCA recently published the results of their preliminary review of ESG benchmarks. The review found that the overall quality of ESG-related disclosures made by benchmark administrators was poor.
• ISS ESG has published its 2023 report on ‘ESG Opportunities and Risks for Investors’. The report identifies key regional ESG risks and opportunities likely to impact portfolios in 2023. 

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 (31/03/23). It includes Global Financial Institutions EUR & GBP Issuance.