September 20, 2023

This text was written by Caleb Mutua. It appeared first on the Bloomberg Terminal.

The worldwide sustainable bond market had its busiest February on report, pushed by massive offers from governments and a string of debut transactions from huge companies.

New gross sales of inexperienced, social, sustainability and sustainability-linked debt reached $87.75 billion final month, making it probably the most energetic February since inexperienced bonds first emerged in 2007, in line with information compiled by Bloomberg. The borrowing blitz follows a good busier January, when over $115 billion was raised.

Inexperienced bonds accounted for greater than half of the entire of February’s gross sales at $49.2 billion, a slight drop from roughly $54 billion in January.

“The sturdy month-to-month issuance leads us to anticipate one other sturdy yr of issuance within the face of excessive inflation, rising charges (particularly in US and Europe) and potential recession dangers,” Bloomberg Intelligence analyst Christopher Ratti wrote in a notice on

Monday.European Funding Financial institution — the primary establishment to difficulty a inexperienced bond — was the largest issuer of inexperienced debt final month, elevating over $11.5 billion throughout completely different transactions and currencies, Bloomberg-compiled information exhibits. In the meantime, Comcast Corp. priced $1 billion in its debut inexperienced bond and is planning to make the debt a part of its long-term plan to lift capital.
Gross sales of sustainability bonds, whose proceeds can be utilized to fund each environmental and social tasks, fell 19% to $23.32 billion in February, from over $28 billion in January.

Issuance of social and sustainability-linked bonds additionally fell final month. Notable offers embody Nokia Oyj’s €500 million ($529.1 million) debut SLB, which obtained orders of over €2 billion, and a four-billion euro social bond from French company Cades.

Structural demand

Morgan Stanley is receiving extra questions from high-yield and leveraged mortgage funds as issuers proceed to offer extra ESG information and there are proposals to European regulation that might drive demand if applied, strategists led by Carolyn Campbell wrote in a notice on Monday.

Roughly 25% of high-yield issuance in Europe is ESG-labeled with banks dominating in inexperienced junk offers, they wrote. In the meantime, labeled debt within the US junk market is comparatively small however rising.

“There may be structural demand for the excellent ESG-labeled high-yield/mortgage issuance, whereas excessive funding prices and an unsure progress outlook ought to restrict leveraged credit score issuance, together with labeled debt, within the close to time period,” wrote the strategists.