The EUR market saw all the action in March (6 transactions; €9.8bn), whilst the USD and GBP market remained shut. This was a result of worsening sentiment amongst investors given recent events in the US regional banking sector and Credit Suisse.

Market activity:

• NRW Bank completed a 10yr €1bn social transaction. The transaction marked their first benchmark transaction this year and fifth EUR social bond overall.
  
• Communauté Française de Belgique (LCFB) successfully issued a new €700m 10yr social bond.
• Societe du Grand Paris were out in the long end with a new 30yr transaction.
• Next Generation EU (NGEU) came out with a 2048 green tap, the first green issuance from the issuer since last November.
• The European Investment Bank (EIB) completed a new 5yr GBP issuance, their first 5yr GBP issuance this year.

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GSS/S issuance quietened through March, (-34% compared to 2022), driven by the increase in volatility faced by the market.

Green GSS/S issuance (c. €47bn) represents 46% of GSS/S issuance in 2023 year-to-date (YTD), with a slight lead relative to social and sustainable issuance (24% and 30% respectively).

The largest portion of GSS/S issuance is commanded by Agencies (41%) followed by Supranationals (33%) and Sovereigns (15%).

SSA GSS/S Supply 2022-2023 YTD

• Sovereign. YTD Sovereigns have a GSS issuance of €35.6bn, entirely consisting of green bonds; several new issuers have entered the sovereign green market including India and Israel.
• Supranationals. YTD Supranationals have a GSS issuance of €34bn, led by sustainable bonds (46%) and green (45%), with social issuance lagging (9%).
  
• Agencies: YTD Agencies have a GSS issuance of €41bn, led by social bonds (46%), then followed by green (39%), with sustainable issuance lagging (15%)
  

The Japanese GSS private placement market saw Taiju Life invest AUD 50mn into a 15yr green bond, issued by the African Development Bank. Taiju cites that this private placement will be used to support efforts in climate change mitigation and adaptation. It also builds on the commitments made at the 8th Tokyo International Conference on African Development where Japan announced its intention to support sustainable green growth in Africa.

UN 5th Conference on the Least Developed Countries

• Member States announced commitments to deliver the Doha programme that aims to support improving biodiversity, tackling malnutrition, and building resilience for the 1.2bn people living in the world’s poorest countries.
  
•  The recent meeting saw several commitments made by major developed economies: USD60m from Qatar, EUR200m from Germany, EUR130m from the European Commission and CAD59m from Canada etc.

UN 2023 Water Conference

• Stakeholders discussed the crucial challenges around overconsumption and unsustainable use, coupled with evaporation due to global warming.
  
• The conference spurred almost 700 voluntary commitments from stakeholders, however the organising Member State’s did concede that a formal global agreement like the 2015 Paris Agreement alongside better data and an international finance mechanism could better safeguard water supplies.
• The current pace of investment would mean that the sustainable development goal (SDG 6: water and sanitation) would not be achieved for decades after the 2030 target. According to WaterAid, investment needs to more than triple (at least $200bn a year) to close the current financial gap and ensure the global population can access safe water and sanitation by 2030.

In April, the following major ESG events and conferences will occur:

• UN Economic and Social Council’s 2023 Youth Forum (18-20 April)
  
• LATAM and the Regional Caribbean Forum on Sustainable Development 2023 (24-28 April)

• The UK DMO has announced its intention to issue £10bn of green gilts in 2023-2024. It also published its highly anticipated green strategy update.
• The Mexican Government presented their ‘Sustainable Taxonomy’. It provides a comprehensive approach to sustainability, which incorporates both environmental and social dimensions in its central design; its aim is to promote the overall well-being of people and the environment.
  
• The Council of Europe Development Bank (CEB) published its Social Inclusion Bond (SIB) report under the Bank’s new portfolio approach for the management of proceeds, following the update of the SIB Framework last year.
  
• KfW recently published its allocation report for the EUR10.6bn of net proceeds from their 2022 green bond programme; more than 70% of projects were related to energy efficiency and 93% of all allocations were made to projects in Germany.
  
• Finanzagentur published their latest green bond allocation report.
  
• BPI France published an updated version of their social bond framework, which notably received a second party opinion (SPO) from EthiFinance.
  

• Fidelity launched a new decarbonisation-focused global government bond which tracks the performance of the Solactive Paris Aware Global Government USD index. The index aims to demonstrate a minimum 14% lower carbon intensity relative to its investable universe.
• BlackRock published their engagement priorities for 2023, outlining 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; continuing efforts in sustainability-focused topics.
  
• TD Asset Management launched their first actively managed ESG-related fixed income product, focusing on issuers with strong sustainability characteristics, and / or that demonstrate positive contributions to the UN SDGs, and in GSS/S bonds.
  
• The Slovenian Central Bank increased its investments in green bonds to €280m.
  

• The European Central Bank (ECB) published its inaugural ‘climate-related and environmental risk disclosure’, outlining the initial success of the decarbonisation of its corporate bond portfolio.
• The European Parliament and Council agreed to boost the number of publicly accessible electric recharging and hydrogen fuelling stations, as part of the new Regulation for the Deployment of Alternative Fuels Infrastructure (AFIR).
  
• HM Treasury has formally announced that nuclear power will be included in the (yet-to-be-published) UK Green Taxonomy.
  
• The White House has vetoed an attempt to ban the inclusion of ESG criteria into public sector pension investments.
  
• The Bank of England Union has published an exploratory report on climate-related risks and the regulatory capital framework. The report found that whilst banks appear to be well-capitalised, over time-appropriate time horizons for climate risk, further work is needed to assess whether there may be a regime gap in the macroprudential framework.
  

• MSCI are updating their current ESG ratings methodology, which is due to be applied in Q2. The update will see a mass downgrade of AAA rated firms alongside an increase in unrated institutions.
• ISS ESG has published its 2023 report on ‘ESG Opportunities and Risks for Investors’.
  
• The UN Principles for Responsible Investment (PRI) published an extensive breakdown on the difference between ESG incorporation into credit ratings versus an entire ESG ratings report.
  
• ERM recently published a report that ranks ESG ratings agencies, and also provides suggestions to the agencies on what they can do to preserve business and investor trust.
  
• The FCA recently published the results on their preliminary review on ESG benchmarks. They found that underlying methodologies for ESG data and ratings products used in benchmarks are not accessible, clearly presented and explained to users.
  

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

• Nathalie Larrousé, Director, Climate and ESG Capital Markets
• Tonia Plakhotniuk, Vice President, Climate and ESG Capital Markets
• Manmeet Baryah, Analyst, Climate and ESG Capital Markets

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

[1] Source: Bloomberg, BondRadar, 03/04/23