Active end to turbulent H1 – Financial Institutions maintain sustainable finance momentum in June

Our specialists reflect on the increase in Financial Institution (FI) green, social, sustainability (GSS) primary market activity.

Primary Market Activity

The GSS primary market saw €11.5bn equiv. issued across 17 transactions - continuing the strong momentum from May - as issuers rushed to tap the market before the onset of summer holidays and the blackout period. Average oversubscription (o/s) of 2.2x for GSS transactions vs 2.5x for conventional deals.

All issuers opted for EUR currency (16 transactions; €10.2bn), except for Mizuho Financial Group, which tapped the Yankee market with its $1.4bn 6NC5 Green Holdco transaction. This breaks the steady run of GSS GBP supply of recent months, albeit remains materially up on the previous year.

Senior issuance dominated the supply with 13 transactions (€9.2bn equiv.) followed by four transactions in green covered format (€2.3bn equiv.). Green format (15 transactions) continues to be the label of choice for financial institutions, with just two in social format.

European Banks & Insurance GSS/S Issuance [1]

GSS/S activity slowed in June (vs May), with issuance of €10bn, but June still marked the third most active month of the year. H1 total volume is up 49% YoY, representing 71% of 2022 total volumes, driven by exceptionally strong volumes in January and May.

Green issuance (c. €47bn) represents 82% of GSS/S issuance in 2023 year-to-date (YTD) – continuing its longstanding dominance and in line with the past few years (c.75% for 2020 & 2021 and 85% for 2022). Social issuance accounts for 16% while Sustainability contribution is a negligible 2%.

Issuance has been dominated by Senior format, with Senior Preferred (37%) being almost equal in volume to Senior Non-Preferred (33%), followed by Covered (24%), along with a small portion of GSS capital issuance (5%).

European Bank and Insurance GSS/S Supply 2022-2023 YTD

Source: Dealogic (30/06/23)

European Bank and Insurance GSS/S Issuance Breakdown 2018-2023 YTD

Source: Dealogic (30/06/23)

Global EUR/GBP FIG GSS Issuance [2]

  • EUR Senior: YTD GSS issuance is €37.6bn (+58% vs 2022 YTD), with total senior supply at €179.0bn (+38%); resulting in an increase of GSS as % of total issuance to 21% (2022 YTD: 18%).
  • GBP Senior: YTD GSS issuance is £3.5bn (+536% vs 2022 YTD), with total senior supply at £22.6bn (+55%); resulting in an increase of GSS as a % of total issuance to 16% (2022 YTD: 4%).
  • EUR Covered: YTD GSS issuance is €14.2bn (+27% vs 2022 YTD), with total covered supply at €144.2bn (+17%); resulting in a small increase of GSS as a % of total issuance at 10% (2022 YTD: 9%).
  • GBP Covered: YTD issuance is nil (2022 YTD: £0.5bn), with total covered supply at £12.6bn (+25%), resulting in GSS as a % of total issuance of nil (2022 YTD: 5%).

Banking & Financial Institutions Sector Developments

Investor Developments

  • BlackRock has launched the BlackRock Global Funds Brown to Green Materials Fund, which is aimed at targeting materials sector-related investment opportunities.
  • BNP Paribas is launching its BNP Paribas European Impact Bonds Fund 2, with three investors joining forces to create the fund: Banque des Territoires, the European Investment Fund and BNP Paribas Cardif. The target size of the fund is €70m and it will finance projects that have a positive impact on society or the environment, promoting innovation in public policy while generating savings in government budget.
  • BBVA announced that they have invested $20m in the Just Climate’s Climate Assets Fund I, with the objective to invest in the highest impact solutions that can radically reduce or remove emissions, while generating attractive risk-adjusted financial returns.

Government and Regulatory Developments

ESG and Credit Rating Agencies Developments

Find out more

As always, if you would like to discuss any of the above further, please reach out to our authors:

*For any unfamiliar terms used within this article please refer to our Insights glossary.

Additional information

[1] Includes European Bank & Insurance GSS/S Issuance

[2] Source: NatWest Markets Syndicate (31/05/23), includes Global Financial Institutions EUR & GBP Issuance.

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