Three trends: The rise of sustainable & green bond markets

ESG goes mainstream

Environmental, Social and Governance (ESG) has become more mainstream. For investors, they are increasingly required to overlay ESG factors in terms of their normal investment processes. Regulators and policy makers are increasingly focused on this particular area, it is evidenced by not only a significant increase in climate change policies but also in terms of the guidance that they are providing corporates and other issuers as to how they can transition to a low carbon economy.

Transparency in ESG improves

As the green, social and sustainability market has grown in recent years, there's been a greater call to encourage transparency and disclosure. As a way in which to address these calls we've seen regulators and policy makers looking to provide some form of additional guidance to the market.

We've seen the EU Commission's Technical Expert Group publishing documentation in June to provide a level of support around the Green Bond Standard as well as the EU finance taxonomy. We've also seen the UK publishing their first Green Finance Strategy at the time of London's first Climate Action Week. Together it is hoped that an increased transparency and disclosure can lend itself to creating a more robust and longer-term market.

Growth in green, social and sustainability bond markets

The green bond market is the oldest of the three asset classes, having been established in 2007 but as the market has developed where you've seen different regions and different issuer types come into the market to look to try and transition to a low carbon economy, we have seen the emergence of social and sustainability bonds in addition to the green bonds.

Since the start of this year we've seen significant growth across all three asset classes totaling up to 37% versus the first half of year last year. The most notable growth however was in the sustainability bond markets of up to 98% and the social bond markets of up to 63%.

Combatting climate change and transitioning to a sustainable economy is one of the biggest challenges of our time. And hopefully collectively we can continue to take all of the information and drive this bond market forward.