Inflation and recession fears stall GSS/S issuance for FIs in October

In the November edition of our monthly Financial Institutions Sustainability newsletter, we breakdown the ESG* trades and trending themes to help you make sense of the latest issues shaping the market.

Primary Market Activity [1]

In the covered market, we saw a green covered bond from BayernLB which received considerable oversubscription (4.8x) and resulted in a 5bps tightening from initial price talks (IPTs). Meanwhile, we saw four transactions in the senior market which were split evenly across green (€1.75bn) and social (€1.75bn). BBVA (€1.25bn green senior preferred), Credit Agricole (€1bn social senior non-preferred) and Intesa Sanpaolo (€750m social senior preferred) all came to market in quick succession – with successful transactions, moving 15-25bps from IPTs. CGD issued a €500m green senior preferred later in the month and achieved 3.2x oversubscription, after somewhat of a drought in supply. 

Overall year-to-date (YTD), green issuance continues to dominate the GSS/S market (80 transactions) with social (18) and sustainability (7) lagging behind. There have been no Sustainability-Linked Bond (SLB) transactions in the banking space so far this year, and only five in wider financial services across EUR, USD and GBP, with the majority issued from Asia.

A similar level of concentration exists with respect to currency; the majority of transactions have been denominated in EUR with 88 transactions so far in 2022 equalling €60bn, followed by $11.5bn (13 transactions) and £1.4bn (4 transactions). 

The format within the YTD 2022 GSS/S primary market has been dominated by senior with €50.0bn issued (69 transactions) followed by €17.8bn in Covered bonds (27 transactions). Subordinated issuance (€5.0bn / 9 transactions) has been materially down on 2021 but has included a Green AT1 for de Volksbank; only the second GSS AT1 in Europe after BBVA in July 2020.

European Banks & Insurance GSS/S Issuance [2]

FI GSS/S issuance in October materially decreased vs September (-55%), but European Bank & Insurance issuance is on a par vs YTD 2021 (-2%). It’s also interesting to note green issuance this year has increased 14% over the same period.

Green continues to dominate the majority of GSS FI issuance (c. €56bn) followed by Social (c. €8.7bn) and with minimal Sustainability issuance (€1.7bn).

GSS/S issuance has been concentrated on Senior (Senior Preferred at 39%, Senior Non-Preferred at 27%, aggregated to 66%). Covered and capital issuance have been 27% and 8% respectively. Aggregate volume is at 86% of FY 2021’s total.

Global EUR/GBP FIG GSS Issuance [3]

  • EUR Senior: YTD GSS issuance is €42.8bn (+3% vs 2021 YTD), with total senior supply at €188.3bn (+3%), bringing the GSS as a % of total issuance to 23% (2021 YTD: 23%).
  • GBP Senior: YTD GSS issuance is £0.9bn (-68% vs 2021 YTD), with total senior supply at £22.8bn (-18%), resulting in a decrease of GSS as a % total issuance to 4% (2021 YTD: 9%).
  • EUR Covered: YTD GSS issuance is €17.1bn (+14% vs 2021 YTD), with total covered supply at €188bn (+107%), resulting in a material decrease of GSS as a % of total issuance to 9% (2021 YTD: 17%).
  • GBP Covered: YTD issuance is £0.5bn (nil for 2021 YTD), with total covered supply at £13.3bn (+14%), resulting in GSS as a % of total issuance at 4% (2021 YTD: nil).

FI & Banking Sector Developments

  • BBVA announced that it will increase its sustainable finance target to €300bn. In February 2018, BBVA announced its first sustainable financial target of €100 billion. In July 2021, the bank doubled this target to €200bn. As of June 30, 2022, the bank had reached €112bn.
  • Barclays announced a three-year partnership with Oxford University’s Sustainable Finance Group and the UK Centre for Greening Finance and Investment. This first-of-its-kind project will meet the urgent need to generate better emissions data and establish decarbonisation pathways which would enable Barclays and other financial institutions to support clients in the UK agriculture sector.
  • Lloyds Bank launched sustainability support for the agriculture sector. The bank is working with the Soil Association to pilot a new service called the Soil Association Exchange. The scheme is designed to help up to 1,000 of its largest British farmers accelerate their transition to net zero and identify financial and environmental advantages for their land.
  • Citizens launched its Carbon Offset Deposit Account solution for its corporate clients. The account provides clients with a simple way to acquire carbon offsets using credit earned on their deposits and to integrate sustainability into their strategies and products.
  • Munich Re has announced from 1 April 2023 it will no longer invest or insure contracts / projects in new oil and gas fields, new midstream infrastructure related to oil and new oil fired power plants.
  • BMO became the first North American bank to buy carbon credits generated through CarbonCure’s unique engineered carbon removal solutions. BMO continues to innovate to meet its net-zero goals with an agreement to reduce and remove 5,750 metric tons of carbon dioxide over 5 years.
  • Macquarie’s Commodities and Global Markets announced that it has invested in EP Carbon, a US-based consultancy that advises on the feasibility and design of nature-based carbon offset projects, providing leading technical advice including project risk mitigation. This advances Macquarie’s voluntary carbon offsets business and emerging carbon markets.
  • Deutsche Bank published its net zero aligned targets for 2030 and 2050 in four carbon-intensive sectors:
    • Oil & Gas: 23% reduction in Scope 3 upstream financed emissions by 2030, and 90% reduction by 2050
    • Power generation: 69% reduction in Scope 1 physical emission intensity by 2030 and 100% reduction by 2050
    • Automotive (light duty vehicles): 59% reduction in tailpipe emission intensity by 2030 and 100% reduction by 2050
    • Steel: 33% reduction in Scope 1 and 2 physical emission intensity by 2030 and 90% reduction by 2050

Investor Developments

  • HSBC AM announced the launch of its new ESG money market fund, the HSBC US Dollar ESG Liquidity Fund. The fund will invest in a portfolio of issuers that HSBC AM has identified as being demonstrably better at addressing ESG risks than other issuers in the investable universe.
  • Schroders announced the launch of its Sustainability Scorecard Initiative for financial advisers. The Scorecard is designed to be a more engaging way for advisers to consider the sustainability credentials of their own businesses.
  • Macquarie AM made a €100m debt investment in a renewable energy portfolio developer. Falck Renewables is a developer, owner, and operator of renewable energy plants in Europe and the US, with an existing portfolio comprising 62 wind, solar, waste-to-energy, biomass, and energy storage projects representing 1,420 MW of combined capacity.
  • BlackRock launched a new website “Energy investing: Setting the record straight”, which is aimed at setting the record straight about its focus on energy investing, its responsibilities to clients and how they consider climate risk.

Government and Regulatory Developments

The Platform for Sustainable Finance published two reports regarding the EU Taxonomy. The first report focuses on the data and usability as part of Taxonomy reporting. The second report focuses on the application of ’minimum social safeguards’ requirements of the EU Taxonomy.

Glasgow Financial Alliance for Net Zero (GFANZ) has published its guide on expectations for Real-economy Transition Plans. The main purpose is to provide a practical guide for companies in the real economy when preparing transition plans.

Net Zero Banking Alliance has published its Transition Finance Guide. It provides a summary of key tools available, as well as an overview of some of the approaches and frameworks to accelerate the shift of capital towards low-carbon activities.

FCA has proposed new disclosure and sustainable investment labelling rules to tackle greenwashing. The package of new measures includes how terms like ‘ESG’, ‘green’ or ‘sustainable’ can be used.

The Green Technical Advisory Group (GTAG) has published ‘part one’ of its independent advice to the government on the implementation of the UK’s ‘green taxonomy’.

For more information on ESG government and regulatory developments check-out our ESG Policy and Regulation Round up: October 2022

ESG and Credit Rating Agencies Developments

  • Morningstar Sustainalytics announced the addition of its Global ESG Universe, which increases its ESG Risk Ratings coverage to over 16,300 issuers; a 3,700 issuer increase.
  • Fitch has published its updated bank “Global Operating Environment” scores to provide additional transparency to its users. The scores form an important input to ratings under both Fitch's “Bank Rating Criteria” and “Non-Bank Financial Institutions Rating Criteria”.
  • Societe Generale and Altalurra Ventures are investing €4.5m in impak Ratings’ Series A round, with the ambition of making it Europe’s leading impact analysis and rating agency. Societe Generale has also chosen impak Ratings to analyse the environmental and social impacts of its major corporate clients and better support them in their environmental and energy transition.
  • ISS ESG published a thought leadership paper “The S Factor: Social Impact Considerations in the ESG Fixed-Income Market”.
  • CDP responded to the release of the UN Environment Programme’s annual Emissions Gap report. Amir Sokolowski, Global Director of the Climate Change Team, CDP said “While the findings of the UN’s Emissions Gap Report are unsurprising, they are no less terrifying: the world is on track for climate catastrophe if emissions continue at their current levels”.

For those looking 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.


[1] Bloomberg, BondRadar (01/11/22)

[2] Dealogic (01/11/22)

[3] NatWest Markets Syndicate (25/10/22)

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