MainStreet Partners publishes new report on state of Green, Social and Sustainability bond markets

by | Mar 16, 2022

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New research from the ESG advisory and portfolio analytics firm, lifts the lid on the status of the GSS bond markets and what progress to expect.

MainStreet Partners, the London-based ESG Advisory and Portfolio Analytics firm, has today released its report on the state of the Green, Social and Sustainability (GSS) bond markets. The report outlines the current and future role of GSS bonds in reaching the environmental and societal targets of our time.

In its inaugural GSS Bond Market Trends, MainStreet Partners – with over a decade’s experience analysing the sustainable debt market – offers its perspective of the current and upcoming dynamics fundamentally shaping how corporations and governments receive capital from investors.

The report provides a concise view of green bonds, sovereign GSS bonds and sustainability-linked bonds (SLBs), the rising star in the GSS market.

 

Since 2010, MainStreet Partners’ proprietary GSS bond databases have provided a unique set of tools to investors to measure and manage sustainability risks and KPIs. Their capabilities pivot on three main products applicable to GSS securities:

  • Bond Ratings – GSS bonds are analysed according to a proprietary framework that focuses on issuer-specific and bond-specific factors.
  • Impact Results & Impact Ratings – impact data reported by GSS bond issuers is aggregated on a normalised basis, based on a set of environmental and social variables.
  • EU Taxonomy Alignment – environmental projects financed by GSS bonds are measured against the regulatory criteria.

Key takeaways from the report:  

  • In 2021, 29% of debt financed in Euro from investment grade non-financial corporate European issuers was green, social or sustainability-linked (GSS) bond (Citi, Dealogic).
  • The GSS bond market has grown by more than 50% per annum over the past five years.
  • The market for SLBs has been the hottest – annual issuance reached US$90 billion in 2021 from just US$9 billion the year before. The type and variety of sustainability KPIs used for these bonds is increasing, and many issuers are already strengthening the previous KPIs they committed to.
  • An environment of rising interest rates and increasing ESG regulation are two challenges that lay ahead, but both corporate and government support is strongly accelerating GSS bond issuance.

Commenting on the findings, Pietro Sette, Research Associate at MainStreet Partners, said: “Everyone would agree that the GSS market has fundamentally changed conversations between investors and issuers, putting our climate and societal objectives under the spotlight. Some of the most selected GSS bond projects to date relate to electric vehicles and renewable energy infrastructure, as well as to providing public healthcare and affordable housing facilities. In a fast-changing regulatory environment, the high transparency of data that GSS Bonds provide makes them essential for issuers and investors to measure and disclose non-financial information”.

 

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