GSS/S issuance for SSAs continues to gain momentum through 2023

In our monthly Sovereign, Supranationals and Agencies (SSA) sustainability newsletter we breakdown the trending ESG* trades and themes, helping SSAs get ahead of the latest issues shaping the market.

Primary Market Activity [1]

The EUR market saw almost all the activity in February (14 transactions; €21.2bn), with the USD market having two sustainable transactions ($5bn IBRD and $1bn IDB Invest) while the GBP market had only one (£400m IADB).

In terms of our activity, we acted as joint bookrunner on the European Investment Bank (EIB) Climate Awareness Bond EARN and Munifin Green Bond. Both transactions marked significant landmarks; EIB and Munifin achieved their largest green transactions to date.

  • Munifin received robust demand, which allowed them to upsize the transaction size during execution from EUR 750m to 1bn, whilst also tightening 2bps from guidance. Bank treasuries are continuing to build out their GSS exposure and played an important role in this transaction, with nearly 50% of the final orderbook allocated to such investors.
  • EIB achieved one of their largest books ever on their largest CAB issuance since the introduction in 2007. It attracted a large and diverse pool of investors – with strong interest from Asian investors (36% of final allocations).       

Secondary Market Activity

For further analysis and information on the Secondary Market, please take a look at the full monthly newsletter on Market Insights. If you do not have access to Market Insights, please contact us here.

SSA GSS/S Issuance

GSS/S issuance remained strong throughout February (+42% compared to 2022), sustaining the strong pickup in issuance we have seen in 2023 across the market.

Green GSS/S issuance (c. €34bn) represents 41% of GSS/S issuance in 2023 year-to-date (YTD); a slight lead on social and sustainable issuance (25% and 34% respectively).

The largest portion of GSS/S issuance is commanded by Agencies (38%) followed by Sovereigns (33%) and Supranationals (26%).

SSA GSS/S Supply 2022-2023 YTD

Source: Dealogic (28/02/23)

Global EUR/GBP/USD SSA GSS Issuance

  • Sovereign. YTD Sovereigns have a GSS issuance of €31bn, entirely consisting of green bonds. Several new issuers have entered the sovereign green market including India and Israe
  • Supranationals. YTD Supranationals have a GSS issuance of €24bn; led by sustainable bonds (58%), then followed by green (31%) with social issuance lagging (11%).
  • Agencies: YTD Agencies have a GSS issuance of €35bn; led by social bonds (46%), then followed by green (37%) with sustainable issuance lagging (17%).

SSA GSS/S Private Placements

The Japanese GSS private placement market has been muted in the SSA space in the first couple of months of 2023, due to the fiscal year end approaching and the unfavourable hedging costs on cross currency investments. However, there are still a couple of notable themes from within the market:

SSA Sector Developments

Investor Developments

  • 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.
  • The State of Florida have proposed new legislation that will prohibit fund managers for state and local entities from considering ESG factors in any investment decisions, and government entities will not be allowed to request ESG information from suppliers in the procurement process. Florida Governor DeSantis has been one of the most vocal anti-ESG advocates.
  • The European Fund and Asset Management Association have warned that the proposed rules on ESG / sustainability-related terms in the names of investment funds put forward by the EU markets regulator (European Securities and Markets Authority “ESMA”) will not fulfil their primary objective of protecting investors from greenwashing risks.

Government and Regulatory Developments

  • The International Sustainability Standards Board (ISSB) announced that the new IFRS global sustainability and climate disclosure standards will be effective as of January 2024.
  • The European Commission voted to back a more ambitious scope of their draft law that requires companies to identify, monitor and mitigate the adverse impact of their activities on the environment, as well as adopt transition plans to meet net zero goals.
  • The Financial Reporting Council published its first Statement of Intent on Environmental, Social and Governance in 2021, which identified underlying issues with the production, audit and assurance, distribution, consumption, supervision and regulation of ESG information.
  • The Autorité des marchés financiers (AMF) proposed the introduction of minimum environmental requirements in European law that must be met by financial products in order to be classified as Article 8 or Article 9 under the Sustainable Finance Disclosure Regulation (SFDR).

ESG and Credit Rating Agencies Developments

  • MSCI announced the launch of the MSCI Corporate Sustainability Insights, a solution designed to increase corporate sustainability executives’ understanding of the ESG and climate challenges and opportunities facing their companies.
  • ISS Market Intelligence announced a significant expansion of responsible investing and ESG-related data attributes available through its Simfund platform, which enables ESG-styled fund trend and benchmarking analysis.
  • Sustainalytics’ ESG Impact Framework has been utilised by Morningstar to launch a new family of ESG focused indexes.
  • S&P Global recently published their report outlining research on sustainable bond issuance in 2023.
  • MSCI communicated an enhancement to their government-adjusted ESG scoring calculation. Going forward, the Government Adjusted ESG Score for countries that: (i) are present in a buffer zone of an adjacent rating band and (ii) retain their prior government ESG Rating, will be constrained to the minimum and maximum range associated with the same corporate ESG Rating.

Find out more

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] Source: Bloomberg, BondRadar, 28/02/23

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