Record Green Bond Issuance as Companies Embrace Sustainability

A record $476 billion worth of green bonds was issued in the first six months of this year – more than the entire total for 2020, according to new data.

An analysis from Bank of America showed that green bonds – defined as those compliant with the standards set by the International Capital Markets Association (ICMA) - raised more than $200 billion in each of the first two quarters of 2021.

Sustainability-linked bonds alone raised $40 billion in the first six months of the year, compared to $16 billion raised across all of 2019 and 2020. Social bonds – those raising money for dedicated social causes – hit $133 billion.

ICMA-compliant green bonds accounted for more than 17% of all bonds issued in June, Bank of America’s research showed.

The group’s analysts now believe green bonds will raise approximately $900 billion for environmental and climate change-linked causes for the whole of 2021, up from its $750 billion estimate published earlier this year.

The bank’s analysts emphasised that “labeled” bonds were only one aspect of environmental, social, and governance (ESG) considerations within fixed income.

“ESG is worth far more than an issuer's first set of climate targets, or the value of its inaugural green bond,” the analysts stated. “We continue to argue that ESG punches well above its weight: once an issuer (or a competitor) starts to discuss ESG issues, the questions (and the impact) continue to build.

“The mere discussion of ESG is only the entry point for issuers and investors. This is true even as investors demand more data and reporting, and issuers call for better standardization.”

Bank of America said it expected to see more issuers to launch green, sustainability, or social bonds, as well as “setting and updating ESG-related goals and targets”.

“Our view is that ESG has to become more forward looking, so we expect the questions and integration to continue as investors incorporate it into their fundamental analysis,” the analysts said.