Record $269.5bn green issuance for 2020: Late surge sees pandemic year pip 2019 total by $3bn

Green finance market resilient, poised for 2021 expansion, positives emerge across green, social, sustainability & transition bonds, sovereign club to grow, annual $1trillion coming closer  

In a year characterised by uncertainty in all walks of life, green bond issuance rebounded in the second half of 2020 to reach a record-breaking USD269.5bn by the end of December, just above Climate Bonds 2019 final total of USD266.5bn (2018: USD171.4bn).

After a strong first quarter, second quarter green bond issuance was impacted by the COVID-19 pandemic, but a record breaking third quarter ensured a strong finish.  

The 2020 figure** is the highest since market inception and maintains the trend of nine consecutive years of increased green market growth. Green bonds, loans and sukuk had originated from 53 countries in 2020.

In a positive sign of product diversification, green loans and green sukuk origination more than doubled, rising from 11 countries in 2019 to 23 in 2020. 

 

2020 saw 60% Average Annual Growth since 2015 – Cumulative $1Trillion Green Milestone reached

Since 2011, the annual issuance of green debt instruments has steadily increased with an evident upswing from 2015.

At the end of 2015, the green debt capital market had just reached a cumulative volume of USD104bn. Five years later, the market surpassed the cumulative USD1tn milestone in early December, with the year ending at a USD1.05tn total. 

Cumulative market size in 2020 reflects an average annual growth rate of 60% since 2015.  

Figure includes green bonds, loans, sukuk & green ABS.

 

Top 20 Countries for Annual Green Bond Issuance

The United States again led national rankings (USD51.1bn), Germany second (USD40.2bn) and France third (USD32.1bn) with China fourth (USD17.2bn) and the Netherlands fifth (USD17.0bn). France’s top three ranking continues its annual hold on a podium position through 2017, 2018 and 2019 and Germany appears in the top three for the first time.

Sweden took sixth place (USD13.3bn), Japan seventh (USD10.3bn), Canada eighth (USD9.0bn), with Spain (USD 8.7bn) and Norway (USD.5.6bn) rounding out the national Top 10.

The remaining national places in the ranking are occupied by the UK, Chile, Singapore, Italy, Portugal, Australia, Finland, Indonesia, and Denmark. The top 20 have a combined total issuance of USD243.8bn. A host of other countries comprise the remaining USD25.7bn of annual issuance.

 

Top 10 largest green bond issuers

Fannie Mae was the largest green bond issuer in 2020 with a total issuance of USD13bn. The enterprise’s Multifamily Green MBS program is used to finance green mortgages backed by multifamily properties that are awarded green building certifications or display audited efficiency improvements.

Germany became the second-ranking green bond issuer in the year following its debut green sovereign bond. The domestic green bond market in Germany is already one of the biggest in the world, due in large part to bonds from state owned development bank KfW (the 4th highest).

The Republic of France continues to be both a sovereign and European market leader, with its sovereign program the fifth largest individual source of green bonds in 2020.

Position
Issuer
Amount Issued (USD)
 
Climate Bonds
Certified
1.
Fannie Mae
13.0bn
 
 
2.
Federal Republic of Germany
12.8bn

 

 

3.
Société du Grand Paris
12.2bn
4.
KfW
9.4bn
 
 
5.
Republic of France
6.9bn
 
 
6.
EIB
4.1bn
 
 
7.
New York MTA
4.0bn
8.
Republic of Chile
3.8bn
9.
Dutch State Treasury Agency
3.4bn
10.
TenneT Holdings
2.6bn
 
 

 

Transport operators and Sovereigns dominate Top 10 Certified Issuers

Urban transport operators dominated the Top 10 with New York MTA, LA MTA, France's SNCF and Japan’s fast train network operator JRRT all prominent green issuers.

Société du Grand Paris (SGP) was the largest Certified issuer of 2020 and an early adopter of the streamlined Programmatic Certification, which SGP uses to Certify its green bond programme funding a decade-long expansion of the Paris commuter and metro rail network.

Among other notable Certifications, global automaker Volkswagen came to market with a pair of green bonds totalling USD2.2bn, financing the development of an extensive EV programme.

Position
Issuer
Amount Issued (USD)
 
Climate Bonds
Certified
1.
 
Société du Grand Paris
 
12.2bn
2.
New York MTA
4.0bn
3.
Republic of Chile
3.8bn
4.
Dutch State Treasury Agency
3.4bn
5.
Volkswagen
2.2bn
6.
SpareBank 1 Boligkreditt
2.0bn
7.
SNCF
1.6bn
8.
China Development Bank
1.4bn
9.
Los Angeles County MTA
1.4bn
10.
JRTT
1.3bn

The Climate Bonds Certification Scheme continues to grow in sync with the market: the cumulative USD150bn of Certifications was passed in 2020 and market share reached a record high of 24% of annual issuance as of October 2020.

 

Use of Proceeds Breakdown 2020

Investment in the energy sector comprised the largest share of 2020 issuance, at USD93.6bn. Low Carbon Buildings represented the second-highest investment at USD70.6bn, followed in third place by Low Carbon Transport at USD63.7bn.

Water Infrastructure at USD17.5bn and Land Use at USD13.6bn was the largest of the remainder.

 

Top Themes for 2021

  1. The return of green multilateralism as a White House committed to action re-joins the Paris Accords, adds momentum to COP and pushes climate higher on the agenda at G7, G7+, G20, OECD and a host of other bodies
  2. The opportunity for a new climate triple-axis to slowly develop between China, EU and US as the world’s largest economic blocs align on the fundamental mid-century goal of zero-carbon  
  3. Transition, Transition, Transition as institutional investor, policymaker and market focus grows on hard-to-abate sectors/industries, low carbon models and corporate capex plans
  4. The rise of the Sovereign Green Bond Club as governments, policymakers and development banks back new issuance in developed and emerging economies to accelerate private sector issuance and markets
  5. Green, social, sustainable and sukuk issuance proliferates, setting the pace towards the vital global milestone of $1trillion in annual green investment
  6. Sustainability is increasingly embedded in investment and financial market infrastructure as the twin influences of the EU Sustainable Action Plan/Green Taxonomy and increased central bank and financial regulator actions filter through multiple jurisdictions

 

2021 – What lies ahead

The impact of COVID-19 in 2020 proved a huge economic and social negative. In that context, the resilience of green finance markets led to a record year of issuance at USD269.5bn issuance, albeit a small increase over 2019.

2021 may enable a sustained resurgence.

 

The role of Green Sovereigns

The Sovereign GSS Bond Survey Report released earlier this month noted the multifaceted role that sovereign issuers have on the markets, both developed and emerging.

The list of possible issuers in 2021/22 includes Bhutan, Brazil, Canada, Colombia, Cote d’Ivoire, Denmark, Ghana, Italy, Kenya, Peru, Spain, the United Kingdom, Uzbekistan and Vietnam.

As we noted in December after Thailand made the second tap of their 2020 sovereign issuance, this line-up still leaves plenty of room amongst G20, OECD, ASEAN and MENA nations to act. 

First out of the blocks this year is Colombia with Bloomberg reporting a programme of green offerings to commence in the second half of 2021. 

Chile is again showing early leadership with the finance ministry announcing a third round of sovereign green issuance, Certified against the Climate Bonds Standard in keeping with the previous 2019 and 2020 transactions.

At the supranational level, the proposed EU programme could be a pivotal influence with up to EUR250bn (USD300bn) of the recovery fund expected to be green bonds, though actual issuance is likely to extend past 2021.

 

The Forecasts

NN Investment Partners posits a 2021 green bond market of EUR300bn (USD360bn). HSBC is predicting strong growth in Asia during 2021 and total green bond issuance between USD310-360bn. SEB envisages green bonds ‘moving towards’ USD500bn, subject to EU issuance. Credit Agricole expects up to EUR600bn (USD720bn) in combined green, social and sustainability bonds for 2021.

At Climate Bonds, we forecast 2021 to produce a tenth consecutive green finance record with a figure ranging from a low to high USD400bn-USD450bn in global green bonds, loans and sukuk.

Social and sustainability bonds are expected to deliver USD250-300bn on top of that.

 

Transition in Focus

Further to these numbers, we’ll be looking more closely at social and sustainability bonds, climate resilience and continuing to expand our focus on transition finance, the coming area of challenge in decarbonising hard to abate industry sectors and driving investment and capex towards zero-carbon technologies and solutions.

Always more to come.

‘Till Next Time,

Climate Bonds

 

Note** This figure is subject to minor, upward adjustment at end January & into February as final data becomes available from pending and late December deals.


Upcoming Webinar!

 

Following the release of the Sovereign Green, Social, and Sustainability (GSS) Bond Report, this webinar invites guest speakers to talk about the benefits of issuing these instruments. This discussion will offer a real insight into the processes and advantages of Sovereign GSS issuance, with the first-hand experience from state finance officials. Register here