Hence you don’t tend to introduce novel terms or issue in an off-the-run tenor. “Green” is however starting to become an exception to this rule. How come?

We see three reasons:

1. “New normal”: ESG features are becoming the “new normal” for certain geographies and sectors, such as utilities and real estate. For firms in these areas, not issuing in sustainability format could arguably be considered complicating the execution!
2. Halo effect: for less “in vogue” issuers, such as those more affected by COVID-19 driven economic slowdown, issuing in a sustainability format may have helped increase investor interest. This is the “green halo” in action – as highlighted by continued stronger oversubscription levels for sustainability-labelled trades.
3. Greater optionality: the presence of a wider range of complementary ESG formats has made it easier for debut bond issuers to opt for an ESG label – you’re not “forced” into a label not appropriate for your business profile and therefore complicating the execution narrative. This year, 38% of debut bonds with ESG features opted for non-green bond structures.

As the saying goes, first impressions are lasting impressions … so, it’s encouraging to see the rapid rise in maiden bond issuers opting for an ESG label.

Number and volume of corporate issuers using “sustainability” format for their debut public bond issuance

Volume of inaugural corporate bonds coupled with sustainability features - split by ESG label