What’s Happening in Sustainable Finance: Evidence of a Social Bond Premium, the Elements of a Just Transition and More

Episode Summary

Hosts

• Nicholas Gandolfo, Director, Corporate Solutions
• Marika Stocker, Senior Manager, Corporate Solutions

In this episode, Nick and Marika provide a run-down of notable deals in the sustainable finance market, from sovereigns issuing sustainable debt, to corporate activity in green and social bonds and loans, to the introduction of new products and structures. They also answer audience questions about the outlook for labeled transition bonds and possible biodiversity-related indicators for linked transactions.

A Premium for Social Bond Issuances?

While evidence of a premium for green bonds – or greenium – continues to emerge, a similar advantage is being seen for social bond issuances. According to research, compared with conventional bond equivalents, social bonds received a yield discount of around 12 basis points at issuance. The explosion of social bond issuance in response to the COVID-19 pandemic, and the oversubscription of social bonds are contributing to this social premium or “socium” found for some social bond issues.

Insight on Elements for a Just Transition

The World Benchmarking Alliance published a report examining the social elements of companies’ low carbon transition. The report assessed 180 companies across three sectors – oil and gas, electric utilities, and automotive – and found that the majority of high-emitting companies are not taking action to move toward a just transition. Other key findings suggest the people most at risk are left out of decision making; companies will need to reskill their workforce as part of their transition plans; companies are not using their influence to advocate for a just transition; and that a just transition needs to be underpinned by companies’ respect for human rights. Hopefully, we’ll see some of the findings from this report reflected in the performance indicators and use of proceeds of sustainable finance transactions going forward.

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Key Moments

01:45	Market news
02:09	Ideas for a "greener" holiday season
02:26	December market volumes
03:12	EU taxonomy discussions continue
03:34	Steeper borrowing costs for sovereigns slow on climate
04:21	Socium for social bonds
05:01	World Benchmarking Alliance just transition corporate assessments
05:49	Data centers and technology in green finance
06:48	Using avoided emissions as targets
06:54	SBTi report on private equity
07:22	TPI report on pathways for other high-emitting sectors
08:12	Green bonds overview
13:23	Social bond overview
15:03	Green loans overview
16:19	SLB overview
19:30	Audience questions
24:22	SLL overview
28:27	Labeled products, transition, and regulatory overview

Links to Select Resources

• Bloomberg: Australia Seen Facing Steeper Borrowing Costs If Slow on Climate
• Environmental Finance: Social Bond 'Socium' Equivalent to One-Notch Credit Rating Upgrade
• GlobeNewswire: The Data Centre Dilemma: The Challenge of Becoming Carbon Neutral - A Look at Twenty Key Metro City Markets
• Treehugger: Volcano-Powered Bitcoin City Proposed for El Salvador
• Transition Pathways Initiative: Carbon Performance Assessment of Other Industrial Companies – Discussion Paper
• Environmental Finance: There Is a Market for Biodiversity - and It Is Expanding
• Wealth Briefing: ESG Phenomenon: Schroders Stokes "Avoided Emissions" Research; Jersey Finance
• Climate Bonds Initiative: Common Language on Financially-Supported Agricultural Green Development Report