The view from…Sustainable Finance Advisory
Antonio Keglevich, Global Head of Sustainable Finance Advisory, discusses how the crisis has accelerated demand for sustainable financing solutions and his outlook for the coming months
For those that may not be aware, what is sustainable finance?
Sustainable finance seeks to incorporate environmental, social and governance (ESG) factors into business and financing decisions, with the three components of ESG each playing a vital role in the transition to a progressively sustainable economy.
To provide a sense of scale, $300 billion of green, social and sustainable bonds were issued globally in 2019 – 50 percent more than in the previous year.
What does your team do?
To meet increasing demand for sustainable financing, we launched a Sustainable Finance Advisory team last September. The team brings together our sustainability expertise and capital markets execution capabilities, which enables us to better serve our clients as regards their ESG requirements – thereby facilitating access to Europe’s green financing market.
How has the current crisis affected issuers of green instruments?
At the outset of the crisis, the urgency of the situation prompted businesses to address their most pressing concerns – solvency and short-term liquidity took centre stage, with ESG considerations placed on the backburner.
Yet, despite this initial pause, we’re seeing clear momentum in the market again – with UniCredit leading several green, social and sustainability bonds since the start of May and raising close to €10 billion.
Just last week we acted as joint bookrunner in the European Investment Bank’s 15-year benchmark Climate Awareness Bond – a transaction that was six times oversubscribed and underlines the importance of the EU Framework in place to facilitate sustainable investment.
So there is still appetite amongst investors?
Absolutely, more than ever! The pandemic seems to have had little impact on investor demand for ESG issuances, as demonstrated by the many ESG-driven investors that began requesting products related to COVID-19 relief measures.
Supported by changes in regulation, we’re seeing this subset of investors broaden their horizons – expanding their portfolios to include social bonds.
Towards the end of May, BBVA became the first European financial institution to launch an unsecured social bond aimed at alleviating the social and economic effects of COVID-19. UniCredit acted as joint bookrunner in the €1 billion issuance, with ESG investors accounting for nearly 70 percent of the total allocation.
What is your outlook for the rest of the year?
Given the current market outlook, UniCredit Research expects $320 billion of green, social and sustainability bonds to be issued globally in 2020. Green bonds are expected to account for $220 billion, while the combined issuance of social and sustainability bonds should hit $100 billion. COVID-related financing – typically issued as social bonds – will be an essential part of ESG long after we have successfully fought the virus.
We remain determined to meet this new class of borrowers and the ongoing expansion of our team is a concrete step in this direction.