Sustainability-Linked Bond watch note: Q4 2021

Sustainability-Linked Bonds (SLBs) made another push in Q4 with sales reaching EUR 76bn equivalent for FY2021, an increase of almost 11 times when compared to 2020. 

Key themes

  • Newmont Corporation issued the first SLB in the mining sector in December 2021 providing a clear sign of the openness of the market towards companies from “hard-to-abate” sectors (as also seen with Oil & Gas in Q3) and its continued evolution.
  • Against this backdrop, SLBs now account for a significant share (24%) of the Sustainable Debt Capital Market (corporate non-financial) and the strong momentum is expected to carry on into 2022 when supply is forecast to reach EUR 170-180bn.
  • In Q4 issuers mainly stuck to environmental Key Performance Indicators (KPIs) (greenhouse gas (GHG) emissions, renewable energy and recycling/waste reduction above all) with an increasing number of companies resorting to the Science Based Target initiative (SBTi) to showcase the ambitiousness of their chosen target (60% at the end of Q4 vs 53% at the end of Q3). Many issuers also included Scope 3 KPIs, either as part of their aggregate GHG emission target or as a standalone (of all companies adding a Scope 3 KPI to their SLBs, 50% did so in Q4 2021), albeit market participants acknowledged that in certain instances companies may have little or no control at all over these types of emissions.
  • Yet, more companies are now open to considering social metrics for their SLBs and a growing number of diversity and gender equality KPIs have been included in Q4 compared to Q3.
  • Coupon step-ups (and the typical 25bps increase in case of failure to achieve the stated target) continue to be the most popular structure given its simplicity, yet companies have been experimenting with new structures over the course of the quarter. Redemption premia, once the second most popular structure, have now been surpassed by more articulated multi step-up structures where issuers assign a specific penalty to each KPI and/or with step-up triggers at different points in time. It remains to be seen if this trend is bound to continue as investors keep their preference for more linear structures that can be modelled more easily.
  • The end of 2021 officially kicked off the Sustainability-Linked Bonds reporting cycle. Italian utility company Enel, who started the market back in 2019, is expected to publish its audited results in the course of 2022 and to have achieved the sustainability performance targets on its “first generation” SLBs.

Supply dynamics*

Supply amount issued EUR bn equivalent

Source: NatWest Bloomberg

Split by sector

Source: NatWest Bloomberg

Split by geography

Source: NatWest Bloomberg

Split by rating

Source: NatWest Bloomberg

Structural features*

Main KPI categories

Source: NatWest Bloomberg

Split by SBTi commitment [1]

Source: NatWest Bloomberg

Sustainability Performance Target (SPT) driven adjustment to debt instrument

Source: NatWest Bloomberg

Step-up as a % of at-issue credit spread [2]

Source: NatWest Bloomberg

Target year as a % of overall tenor

Source: NatWest Bloomberg

Total cost in bps if target is not met

Source: NatWest Markets

*Note: Analysis based on Sustainability-Linked Bonds issued in EUR, USD, GBP since 2019

  1. Representative of deals with at least 1 Environmental KPIs
  2. Coupon step-up adjustment (bps)/Issue spread to benchmark (mid-swap spread for EUR, Gilt spread for GBP and T spread for USD)

This article has been prepared for information purposes only, does not constitute an analysis of all potentially material issues and is subject to change at any time without prior notice. NatWest Markets does not undertake to update you of such changes.  It is indicative only and is not binding. Other than as indicated, this article has been prepared on the basis of publicly available information believed to be reliable but no representation, warranty, undertaking or assurance of any kind, express or implied, is made as to the adequacy, accuracy, completeness or reasonableness of the information contained in this article, nor does NatWest Markets accept any obligation to any recipient to update or correct any information contained herein. Views expressed herein are not intended to be and should not be viewed as advice or as a personal recommendation. The views expressed herein may not be objective or independent of the interests of the authors or other NatWest Markets trading desks, who may be active participants in the markets, investments or strategies referred to in this article. NatWest Markets will not act and has not acted as your legal, tax, regulatory, accounting or investment adviser; nor does NatWest Markets owe any fiduciary duties to you in connection with this, and/or any related transaction and no reliance may be placed on NatWest Markets for investment advice or recommendations of any sort. You should make your own independent evaluation of the relevance and adequacy of the information contained in this article and any issues that are of concern to you.

This article does not constitute an offer to buy or sell, or a solicitation of an offer to buy or sell any investment, nor does it constitute an offer to provide any products or services that are capable of acceptance to form a contract. NatWest Markets and each of its respective affiliates accepts no liability whatsoever for any direct, indirect or consequential losses (in contract, tort or otherwise) arising from the use of this material or reliance on the information contained herein. However this shall not restrict, exclude or limit any duty or liability to any person under any applicable laws or regulations of any jurisdiction which may not be lawfully disclaimed.

NatWest Markets Plc. Incorporated and registered in Scotland No. 90312 with limited liability. Registered Office: 36 St Andrew Square, Edinburgh EH2 2YB. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. NatWest Markets N.V. is incorporated with limited liability in the Netherlands, authorised and regulated by De Nederlandsche Bank and the Autoriteit Financiële Markten. It has its seat at Amsterdam, the Netherlands, and is registered in the Commercial Register under number 33002587. Registered Office: Claude Debussylaan 94, Amsterdam, the Netherlands. Branch Reg No. in England BR001029. NatWest Markets Plc is, in certain jurisdictions, an authorised agent of NatWest Markets N.V. and NatWest Markets N.V. is, in certain jurisdictions, an authorised agent of NatWest Markets Plc. NatWest Markets Securities Japan Limited [Kanto Financial Bureau (Kin-sho) No. 202] is authorised and regulated by the Japan Financial Services Agency. Securities business in the United States is conducted through NatWest Markets Securities Inc., a FINRA registered broker-dealer (, a SIPC member ( and a wholly owned indirect subsidiary of NatWest Markets Plc.

Copyright 2022 © NatWest Markets Plc. All rights reserved.

scroll to top