Global sustainable lending volumes in Q1 2024 ($113.5bn) decreased by over 14% compared to Q1 2023 with green loan activity reducing by almost 25% (Figure 1). The decrease in sustainable lending volumes, is (in part) due to the stringent requirements of green projects, which is not yet offset by the broader application of Sustainability-Linked Loans (SLLs) to a greater variety of industries.

The significant increase in green lending earlier this year seems to have stopped in March. A potential contributing factor may be the realisation of higher interest rates for longer, given strong US inflation data. Data provider Wood Mackenzie, for example, states that the “high capital intensity and low returns on green projects make them particularly vulnerable to high intertest rates”.

Figure 1: Global sustainable lending volumes, Q1 23’ vs. 24’ ($bn)

An analysis of sustainable lending in key jurisdictions (Figure 2) shows a contraction in the US compared to Q1 2023, predominantly driven by ESG greenwashing concerns and backlash. This has been evident through the opposition to the SEC Climate Disclosure Rules, which have been paused following a coalition of 10 Republican states filing a lawsuit to challenge the newly introduced regulations.

Figure 2: Share in sustainable lending – key markets, Q1 2024 vs Q1 2023 (% sustainable lending)

Germany’s astounding 47% increase to top the sustainable lending volumes in Q1 2024 vs Q1 2023 has been driven largely by syndicated deals in the industrials segment. Some of these have been refinancings of previous deals, in spite of Germany’s EV sales falling by 24% in 2024 as high inflation and rising energy prices have dampened demand.

Top-down efforts seem to be paying off in Singapore, with the country seeing the greatest proportion of lending being sustainable in Q1 2024 (74%). This push is supported by the Singapore Sustainable Finance Association, who in January 2024 was launched as the first cross-sectional body to aid the development of Singapore as a global centre for sustainable finance.

A new player to this space relative to Q1 2023 is the UAE. The region has shown a growing interest in sustainability, complemented by the hosting of COP28. For example, as part of its 2024 Strategy, the Dubai International Finance Centre (DIFC) established a general Sustainability Framework underpinning its initiatives across ESG and Government alignment space.

Overall, lending volumes in Q1 2024 were largely concentrated in fewer sectors, such as industrials, real estate and energy & utility as compared to Q1 2023 which saw greater diversification in the top sectors (Figure 3). Machinery drove the largest proportion of sustainable lending globally and was largely attributed to two SLLs with a combined total of c.$26.7bn for Deere & Co. and Siemens.

Figure 3: % of sustainable lending across top 10 sectors, Q1 2023 (left) vs Q1 2024 (right)

NIB signs sustainability-linked loan with Elisa

Nordic Investment Bank (NIB) and Finnish Elisa Oyj have signed a €100m million 7-year sustainability-linked loan, which will be used to finance investments in 5G and optic fibre access, to increase capacity and coverage in Finland and Estonia. The interest rate margin on the sustainability-linked loan is linked to Elisa’s climate targets (reduction in Scope 1, 2 and 3 greenhouse gas (GHG) emissions) and the development in access to high-speed connection (decrease in population without highs-peed connection in Finland and Estonia).

IFC and JICA sign $400m green finance loan package

The International Finance Corporation (IFC), together with the Japan International Cooperation Agency (JICA), has completed the provision of a $400m green finance package to BBVA in Peru. This initiative is designed to bolster BBVA’s loan portfolio in sustainable building and energy efficiency projects, and the package includes advisory services to support real estate developers obtain EDGE and Leadership in Energy and Environmental Design (LEED) certifications.

EQT-backed EdgeConneX secures $1.9bn in sustainable-linked financing

Global data centre provider and EQT-backed EdgeConneX raised another $1.9bn in sustainability-linked financing. This transaction marks EdgeConnex’s second major financing deal in the past 12 months and incorporates margin ratchets linked to the company’s sustainability objectives such as: carbon neutrality, eliminating its waste and water footprint, and ensuring their data centre platform is powered by 100% renewable energy by 2030.

Enpal secures €365m debt commitments for Residential Solar Securitisation

Berlin-based Greentech, Enpal, has raised €356m debt commitments which will be used to finance more than 12,500 new solar systems for Enpal’s customers, including energy storage and electric vehicle charging systems. This transaction increases Enpal’s overall refinancing commitments to more than €1.6bn. Enpal’s transaction marks one of the first Solar Asset-Backed Securities (ABS) deals in Europe where the asset class has thus far been underutilised when compared to the US.

IFC backs BNPP Poland with $548m sustainable significant risk transfer

BNP Paribas Bank Polska (BNPP Poland) has agreed a $548m synthetic significant risk transfer transaction (SRT) with the International Finance Corporation (IFC) which will help it to issue sustainable loans. The synthetic SRT will help increase financing in projects such as renewable energy, water efficiency and clean transportation in Poland.

Robeco to launch range of transition investing strategies in ‘coming months’

Robeco will launch a range of transition investing strategies across several asset classes in the coming months. The new transition investing strategies are seeking alpha in all industries that are making the sustainable transition, including those in high carbon-intensive sectors. According to Robeco, the launch of the new range comes as most transition investing is currently focused on private markets and real estate, with the new strategies aimed at making transition investing available to broader audiences.

Wellington Management raises $385m for climate tech venture fund

London-based investment manager, Wellington Management, has announced the final close of their inaugural climate solutions-focused venture fund. The fund has raised $385m in investor commitments and seeks to invest in private companies developing solutions targeting climate change mitigation and adaptation across several themes, such as energy transition, food and agriculture innovation, and enterprise digitisation.

Mississippi hits BlackRock with cease-and-desist order over ESG investments

Mississippi Secretary of State, Michael Watson announced the launch of a cease-and-desist order against BlackRock, aimed at stopping alleged “fraudulent action” by the firm and seeking to impose a multimillion-dollar administrative penalty over the company’s ESG investment policies. The state said BlackRock’s offerings marketed as non-ESG funds are misleading because the firm has committed to use all assets under its management to work towards reducing carbon emissions to net zero, as a member of the Net Zero Asset Manager Alliance (NZAMA). Watson’s office argued that BlackRock’s ESG funds were misleading because the firm said ESG can drive positive financial outcomes for investors, which Watson’s office disputes.

Copenhagen Infrastructure Partners acquires majority stake in Elgin Energy

Copenhagen Infrastructure Partners (CIP) has, through its flagship fund CI V, acquired a majority stake in Elgin Energy, an international solar company, to deliver and expand its existing 15GW solar PV and battery portfolio. Elgin Energy has thus far delivered close to 2GW of ready-to-build solar PV and storage projects and the acquisition seeks to leverage CIP’s industrial approach to procurement and construction to further expand its pipeline and develop into a fully integrated and full-service solar and storage company. 

Bezos Earth Fund to invest $100m in AI-powered climate and nature solutions

Bezos Earth Fund announced the launch of the AI for Climate and Nature Grand Challenge, with plans to grant up to $100m to advance AI-based solutions aimed at addressing climate change and nature loss. The challenge targets priority areas in each funding round, with the first round focussing on solutions in sustainable proteins, biodiversity conservation and power grid optimisation.

Heavier ‘net-zero transition opportunities’ exposure for private vs public climate funds, reveals MSCI Study

A new study by MSCI, In the Name of Climate: Private vs Public Funds, has examined private and public funds with climate-related names. MSCI found a “green rush” towards climate funds in both the private and public markets over the past few years, with more climate funds launched in private markets between 2020 and Q3 2023, than in the previous nine years combined, and with these new funds representing more than 70% of the $90.5bn of cumulative capital now encompassed in private markets’ climate funds. Similarly, there are now more than 1,300 public markets climate funds in the market, including more than 70% that were launched from 2020 through Q3 2023, representing nearly 80% of assets-under-management (AUM).

European ESG fund market to reach €9.4tn by 2027, says PwC

The level of assets allocated to ESG strategies in Europe will rise to €9.7tn over the next four years according to PwC Luxembourg. The global consultancy group made the forecast based on trends it analysed around launches, flows and investor appetite over the course of 2023. The upsurge will mean that three-quarters of all funds will either be Article 8 or Article 9 by 2027.

Preqin launches ESG fund performance benchmarks

Preqin has announced the launch of a new ESG fund performance benchmarks, which aim to increase transparency and empower users to better understand whether ESG funds outperform the market or their non-ESG peers. The data coverage encompasses ESG fund labels across the main private market asset classes and is curated from various sources including Freedom of Information Act (FOIA), fund manager voluntary contributions, listed firm financial reports, public filings, annual reports, and aggregated and anonymised performance data sourced directly from fund manager quarterly reports.

Guidance on the Sustainability-Linked Loan Principles (SLLP) in fund finance

Jointly published with the Asia Pacific Loan Market Association (APLMA), Loan Market Association (LMA), and Fund Finance Association, the SLLP outlines the challenges and considerations in applying SLLP to fund finance facilities. The guidance provides additional context towards the suitability of SLLs against other ESG-labelled products as well best practice for implementing KPIs, and calibration of Sustainability Performance Targets (SPTs) across a range of contexts such as the level of control in a fund’s portfolio companies.

CarbonChain launches commodities supply chain emissions reporting solution

Climate accounting software provider CarbonChain announced today the launch of CarbonChain Comply, a new carbon reporting solution for businesses within metals and energy supply chains.

The new solution aims to address the growing regulatory requirements and stakeholder demands for transparent and accurate disclosure in the commodities supply chain.

80% of global investors now have sustainable investment policies in place

A new study released by global professional services firm Deloitte and The Fletcher School at Tufts University has shown that a vast majority of professional investors globally have put in place ESG investment policies over the past several years (79% vs. 20% 5 years ago), with investors looking both to minimise sustainability-related risk and capitalise on opportunities. Interestingly, despite the anti-ESG sentiment ongoing in the U.S., the survey found that U.S. investors were actually more likely to have sustainable investment policies in place than their global peers.

'Huge opportunity' for private transition credit growth, says HSBC AM

Speaking at the Environmental Finance Sustainable Debt EMEA conference in London, private credit senior responsible investment specialist Yasomie Ranasinghe has said there is a “huge opportunity” for private credit market to provide transition finance. Ranasinghe said that the rise in sub-IG transition finance was "exciting" for an investor like HSBC AM due to greater flexibility in financing structures, particularly for harder-to-abate sectors, and offers individual investors the ability to influence the sustainability targets and margin ratchets through bilateral loans (direct lending).

Sustainable Investment Forum Europe 2024 (2 May 2024, Paris)

The Sustainable Investment Forum Europe offers a crucial platform for finance stakeholders to navigate the challenges and opportunities of the sustainable finance market in Europe. The Forum aims to support the acceleration of growth while prioritising the transition towards a resilient, equitable, and sustainable economy.

Organised by Climate Action in official partnership with United Nations Environment Programme Finance Initiative (UNEP-FI), the Forum will bring together 350 finance stakeholders to Paris for its 7th annual edition. Through discussions on portfolio alignment, risk mitigation, and impact investing, the Forum emphasises the importance of investing for a just and equitable transition to accelerate Europe’s economic transformation. Additional details of the event and a link to register.

Seventh Sustainable Investor Summit DACH 2024 (7-8 May 2024, Frankfurt)

The Sustainable Investor Summit (SIS) of Institutional Capital Forum (ICF) is a strong voice in the DACH (Germany, Austria, Switzerland) region advancing sustainable, responsible and impact investing across all asset classes. The mission is to rapidly shift investment practices towards sustainability, focusing on long-term investment and the generation of positive social and environmental impacts. SIS 7 will highlight current developments, investment opportunities and risks across all asset classes and relevant geographic markets. Additional details of the event and a link to register.

SuperReturn International (4-7 June 2024, Berlin)

Join the SuperReturn International Conference 2024 in Berlin from 4-7 June and network at a senior and global private finance gathering. Get the inside track on innovation, ESG integration, growth, private debt and energy transition. Additional details of the event and a link to register.

For those looking to discuss any of the above further, please reach out to our authors:

• Rahel Haque, Vice President, Climate and ESG Capital Markets
• Fazl Ahmad, Analyst, Private Finance Structuring and ESG
• Javier Patria, Analyst, Climate and ESG Capital Markets

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