Covered bond issuance was muted with just a sole issuance. Whilst, amid weak supply, the prevalence of GSS capital issued was clear; recording three T2 transactions from insurance issuers.

Unlike in March, all issuers opted for EUR currency, while the green label continued its dominance in the GSS market. There were four green transactions versus one social. Interestingly, in the covered bond market, 41% of year-to-date (YTD) EUR, USD and GBP covered bond supply has been in social format, up from 18% in 2022.

GSS/S issuance slumped by 36% year-on-year (YoY) in April, marking yet another monthly decline in volumes. Nonetheless, 2023 YTD total volume is still high, up 35% YoY and already at 40% of 2022 total volumes; driven by the exceptionally strong volumes in January.

Green GSS/S issuance (c. €28bn) represents 84% of GSS/S issuance in 2023 YTD. It’s continuing its longstanding dominance and remains in line with the past few years (c.75% for 2020 & 2021 and 85% for 2022). Social issuance accounts for 12%, in line with 2022 volumes, and Sustainability at 3%.

GSS/S issuance has been evenly split between senior preferred (35%) and senior non-preferred (35%) followed by covered (23%), along with small portion of GSS capital issuance (7%).

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 €22.3bn (+58% vs 2022 YTD), with total senior supply at €126.5bn (+37%); resulting in an increase of GSS as % of total issuance to 18% (2022 YTD: 16%).
• GBP Senior: YTD GSS issuance is £1.1bn (+100% vs 2022 YTD), with total senior supply at £16.0bn (+50%); resulting in an increase of GSS as a % of total issuance to 7% (2022 YTD: 5%). 
• EUR Covered:  YTD GSS issuance is €8.2bn (+19% vs 2022 YTD), with total covered supply at €111.0bn (+15%); resulting in a small increase of GSS as a % of total issuance at 7% (2022 YTD: 7%).
• GBP Covered: YTD issuance is nil (2022 YTD: £0.5bn), with total covered supply at £7.8bn (-13%); resulting in GSS as a % of total issuance of nil (2022 YTD: 6%).

• Citi announced the launch of its new sustainable time deposit solution designed to assist U.S. institutional clients when investing excess cash, while supporting their sustainability goals. The new Sustainable Time Deposits will support projects identified under Citi's green and social bond frameworks.
• BBVA announced it has directed €150 billion in sustainable business from 2018 to March 2023; half of the €300 billion target set for the 2018-2025 period. Nearly €14 billion was mobilised in the year's first quarter, an increase of almost 20% compared to the same period in 2022.
• Standard Chartered has updated its net zero roadmap, committing to an absolute emissions target and trajectory for the oil and gas sector. This target sets a carbon budget that requires a 29% reduction in absolute financed emissions for the sector by 2030, when calculated from a 2020 baseline.
• SEB and Crédit Agricole CIB are jointly launching a sustainable and open platform for digital bonds built on blockchain technology. Through the platform, issuers in capital markets will be able to issue digital bonds onto a blockchain network, with the aim of improving efficiency, and enabling real-time data synchronisation across participants.   
• Bank of America, Boom Supersonic, Boston Consulting Group, JPMorgan, Meta and clean energy non-profit RMI are joining together through the Sustainable Aviation Buyers Alliance to purchase sustainable aviation fuel certificates at scale. This leap forward from previous individual sustainable aviation fuel certificate purchases by corporations dramatically strengthens the demand signal aviation customers are sending to the sustainable aviation fuel market.
• Barclays and Unreasonable Group have announced a five-year extension of its Unreasonable Impact programme to support an additional 200 sustainable and environmental impact ventures. Since 2016, Barclays’ Unreasonable Impact programme has supported over 250 companies who have raised over $10bn in financing and employ more than 19,500 people.
• Citi and Hokodo have announced their collaboration to power payments for Covento, a first-of-its-kind renewable energy marketplace. Covento’s stated aim is to transform the cumbersome buying processes for spare parts within the renewable energy space, that are currently fragmented and lacking in transparency.

• AXA IM published their 2022 Stewardship and Engagement Report which highlights the increasingly active / stewardship role they are playing as a responsible investor.
• MUFG Bank has announced the Marunouchi Climate Tech Growth Fund with Mitsubishi Corporation and Pavilion Private Equity. The fund will invest mainly in climate-tech-related start-ups for growth.
• Lloyd’s Investment Platform launches a Private Impact Fund with £250m initial allocation for sustainability-focused assets. The fund will invest globally across private equity, infrastructure, natural capital and real estate targeting the long-term themes of climate mitigation, climate adaptation, circular economy and social inclusion.

• The European Central Bank has published its third assessment of the progress European banks have made in disclosing climate and environmental risks. The bank highlighted that most banks have expanded their climate and environmental disclosures, but quality of information remains too low.
• ESAs have published a Consultation Paper with amendments to the Delegated Regulation of the Sustainable Finance Disclosure Regulation (SFDR). The ESAs are proposing changes to the disclosure framework to address issues that have emerged since the introduction of SFDR and further technical revisions to the SFDR Delegated Regulation.     
• The ISSB intends to consult on future priorities and international applicability of the Sustainability Accounting Standards Board (SASB) standards.

• Sustainalytics has launched a new low carbon transition rating, providing a forward-looking assessment of a company’s current alignment to a net zero pathway.
• S&P Global1 Sustainable launched a Nature & Biodiversity Risk dataset for assessing nature-related impacts and dependencies across a company's direct operations that can be applied at the asset, company and portfolio level.
• ISS ESG have published a paper “ESG Disclosure Trends in Europe: Climate, Labor Lead Improvements”. The analysis shows that last year saw a 45 percent increase in the disclosure of environmental metrics compared with the year earlier. 

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 (10/05/23), includes Global Financial Institutions EUR & GBP Issuance.