In a month of limited supply, February saw almost all issuers opt for EUR currency. ABN AMRO (a notable exception) opted for a £500m 5yr green in Senior Non-Preferred format. It’s worth noting that ABN AMRO also issued a benchmark CHF green bond with Danske Bank, whilst SpareBank 1 Nord-Norge issued sub-benchmark green bonds in the currency.

Senior format continued to account for the majority of issuance (six transactions) including a €500m senior preferred green by Hypo Vorarlberg, their inaugural GSS benchmark bond. NN Bank and UniCredit both came with €750m covered bonds, and there was no GSS capital issued this month.

The green format remained the preferred label for financial institutions; accounting for all eight GSS transactions this month (no issuance in social or sustainability format).

Green, Social, Sustainability and Sustainability-linked (GSS/S) issuance slowed in February with a modest 7% year-on-year (YoY) growth. However, the 2023 YTD total remains strong; up 68% YoY, already at 31% of 2022 total volumes, due to exceptionally strong volumes in January.

Green GSS/S issuance (c. €20bn) represents 82% of GSS/S issuance in 2023 YTD, as it continues its longstanding dominance and remains in line with previous years (c.75% for both 2020 / 2021 and 85% for 2022). Social issuance is at 14%, marginally up on previous years, with sustainability at 4%.

GSS/S issuance has been evenly split between senior preferred (35%) and senior non-preferred (38%) followed by covered (24%), along with a small tail of GSS capital issuance (2%).

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

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

• EUR Senior: YTD GSS issuance of €18.0bn (+64% vs 2022 YTD) with total senior supply at €87.8bn (+87%); resulting in a decrease of GSS as a % of total issuance to 21% (2022 YTD: 23%).
• GBP Senior: YTD GSS issuance is £500m (2022 YTD: nil) with total senior supply at £13.2bn (+208%); resulting in GSS as a % of total issuance of 4% (2022 YTD: nil).
• EUR Covered: YTD GSS issuance of €6.1bn (+303% vs 2022 YTD) with total covered supply at €69.5bn (+57%); resulting in an increase of GSS as a % of total issuance to 9% (2022 YTD: 3%).
  
• GBP Covered: YTD issuance is nil (2022 YTD: £0.5bn) with total covered supply at £4.0bn (+3%); resulting in GSS as a % of total issuance of nil (2022 YTD:13%).
  

• NatWest Group published an initial iteration of its Climate Transition Plan (CTP). More detail on the plan can be found in their Climate Related Disclosure Report (pg.24 onwards); accessed via the link provided.
• Deutsche Bank has increased its target for ESG financing and investments to €500bn (between early 2020 and the end of 2025) after exceeding its initial target of ‘€200bn by 2022’, by €15bn. To meet its new target, the bank will: (1) convert traditional supply chain financing of international companies, to a supply chain financing linked to environmental and social criteria; (2) provide at least €3bn in ESG financing for developing economies and emerging markets by the end of 2025; (3) supply between €7bn and €10bn in financing for energy efficient homes by the end of 2025.
• The Bank of Ireland launched a new funding partnership with Kerry Dairy. The partnership will see the development of a sustainability-linked loan with discounted rates and flexible finance options for farmers. The loans will provide an additional funding option for farmers in the implementation of sustainable farming practices aimed at: reducing carbon and ammonia emissions, enhancing animal health, welfare and productivity, improving biodiversity and water quality.
• BBVA, BNP Paribas, CIBC, Itaú Unibanco, National Australia Bank, NatWest, Standard Chartered, SMBC and UBS provided $45m in funding to Carbonplace. Through the investment, each bank shares equal equity ownership of the new company. The company is expected to launch its platform later this year.
• Deutsche Bank and WWF signed an agreement for an initial two-year advisory service. The bank and the conservation organisation will work together to further advance sustainable finance at Private Bank Germany and thus contribute to Deutsche Bank’s sustainability strategy. The bank also plans to cooperate with the WWF to evaluate the concept of its designated green branches.
• Bank of America Community Development Banking (CDB) have provided $7.85bn in lending and investing in 2022. CDB deployed $5.2bn in debt commitments and $2.7bn in investments to help build strong, sustainable communities through affordable housing and economic development.
• UniCredit has announced its 2030 targets for the three most carbon intensive sectors within its portfolio. These include: (Oil & Gas) 29% reduction in its Scope 3 financed emissions, starting from a baseline of 21.4Mt CO2e in 2021; (Power Generation) c. 47% reduction in Scope 1 weighted physical intensity at 111 gCO2e/kWh from a baseline of 208 gCO2e/kWh in 2021; (Automotive) c. 41% reduction in Scope 3 “Tank To Wheel” weighted physical intensity at 95 gCO2/vkm from a baseline of 161 gCO2/vkm.

• Goldman Sachs Asset Management has established Verdalia Bioenergy, through its infrastructure investing business. Verdalia Bioenergy is a new business focused on developing, acquiring, building and operating biomethane plants across Europe. Verdalia Bioenergy aims to become a leading biomethane operator, starting from Spain and subsequently expanding across Europe; looking to deploy in excess of €1bn over the next 4 years.
• AXA Investment Management has announced that they intend to align the compensation of c.400 senior executives to its ESG ambitions alongside their existing criteria.
• Phoenix Group has assigned £338m of ‘with-profits’ investment funds to a new multi-asset climate solution, that will be managed by Robeco. The new solution forms part of Phoenix Life and Standard Life’s wider ‘with-profits’ strategic asset allocation and will invest in companies pursuing a net zero decarbonisation strategy.

• The European Parliament and European Commission has provisionally agreed to establish a green bond standard (EuGBs). All proceeds of EuGBs allocated to sectors covered by the EU Taxonomy will need to be invested in economic activities that are aligned with the taxonomy. For sectors not yet covered by the EU taxonomy and for certain other specific activities there will be a “flexibility pocket” of 15%.
• The EU Commission has released its “Green Deal Industrial Plan”. The Plan aims to provide a more supportive environment for the scaling up of the EU’s manufacturing capacity for the net zero technologies and products required to meet Europe’s climate targets.
• The FCA have published a discussion paper asking for views on sustainability-related governance, incentives and competence in regulated firms, with the aim to encourage an industry-wide dialogue. The deadline to respond to the discussion paper is 10 May 2023.
• The European Banking Authority (EBA) has launched an industry survey to receive input from credit institutions on their green loans and mortgages, as well as market practices related to these loans. The purpose of the survey is to collect both quantitative and qualitative information the EBA can use to advise the European Commission.

• ISS Market Intelligence has announced a significant expansion of the responsible investing and ESG-related data attributes available through its Simfund platform, which enables ESG-styled fund trends and benchmarking analysis.
• Fitch Ratings have stated that the large French banks are ‘increasingly integrating ESG targets in their policies and strategies’, spurred by growing scrutiny from regulators, investors and the public.
• S&P Global recently published their report outlining research on sustainable bond issuance in 2023. The report noted that government action, broader market uncertainty, adaptation financing, and responding to credibility questions will help determine total issuance.
• MSCI announced the launch of ‘MSCI Corporate Sustainability Insights’, a solution designed to increase corporate sustainability executives’ understanding of the ESG and climate challenges and opportunities facing their companies. 

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

• Caroline Haas, Head of Climate and ESG Capital Markets
• Doug Shuffman CFA, Vice President, Climate and ESG Capital Markets
• Jake Hallam, Associate, Climate and ESG Capital Markets
• Pulkit Khurana, Associate, Climate and ESG Capital Markets
• Siobhan Wartnaby, Analyst, Climate and ESG Capital Markets

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

(1) Includes European Bank & Insurance GSS/S Issuance

(2) Source: NatWest Markets Syndicate (01/03/23). It includes Global Financial Institutions EUR & GBP Issuance.