SUSTAINABLE DEBTGLOBAL STATE
OF THE MARKET
H1 2020GREEN

SUSTAINABILITYPANDEMIC

SOCIAL

Prepared by Climate Bonds Initiative.
Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

1

The world in 2020

Contents

2020 has been an exceptional year so far. The
COVID-19 pandemic may have caught many offguard, but the reality is pandemics are only one of themany negative impacts we can expect to occur with increasing
regularity in the face of environmental degradation.
The COVID-19 pandemic is another confirmation of the interrelationship between social and environmental issues, of thedangers we face as a species, and of our unpreparedness to deal
with shocks in a robust and resilient manner.
But a crisis is also an opportunity. And what has become clear
in the midst of this crisis is that it could also be a catalyst forsystemic change to the global economy to address our mostpressing environmental and social challenges.
About this report
Climate Bonds has been producing State of the Market reports focused on analysing thegreen bond market since 2011.2 This report goes beyond previous reports in this series tocover the full range of social, sustainability and green labels for this first time. It is broken up
into two parts:
Part 1 provides an overview of green, social and sustainability bonds. This includes a fullanalysis of green bonds issued in H1 2020 and an in-depth historic analysis of other debt
themes – sustainability, social and pandemic bonds – from 2014 to H1 2020. This is madepossible by the expansion of Climate Bonds’ market coverage to include other debt labels,
which will culminate in the launch of a separate database for such instruments still this year.

3 Executive summary
5 Part 1: Sustainable debt market analysis
6 Introduction
7 Sustainable debt market
8 Thematic deep dives
8 Green
11 Sustainability
13 Social
16 Pandemic
18 Part 2: Policy and market development
18 COVID-19 and the climate crisis
22 Framework, harmonisation, and common
definitions
24 Wider sustainable finance developments
in major regions
24 Europe
24 China
25 USA
27 Central banks playing a bigger role
30 Global stock exchange developments
31 Conclusion: lessons for the critical 20s
32 Appendix A
33 Appendix B
34 Endnotes

Part 2 presents a detailed overview of policy measures from around the world related tosustainable finance. These cover a diverse set of stakeholders, from governments to central
banks to investors, and reiterate the need for a green and sustainable recovery globally in a
post-COVID world.
The overall aim is to provide a more comprehensive overview of sustainable debt markets,connecting this with policy and related initiatives, and ultimately supporting the growth ofsustainable finance.

About the Climate
Bonds Initiative
The Climate Bonds Initiative (Climate
Bonds) is an international, investorfocused, not-for profit organisation
working to mobilise the USD100tn bondmarket for climate change solutions.
Our mission is to help drive down thecost of capital for large-scale climate andgreen infrastructure projects, including
supporting governments seeking
increased capital markets investments tomeet climate goals.

Green Bond Data PlaygroundTo complement this report, we have createda chart-based Green Bond Data Playgroundthrough which you can analyse and viewthe green bond market in various ways. It
is available here – we invite you to spendsome time playing.

Financing Credible Transitions paper
Climate Bonds recently launched thisgroundbreaking whitepaper,1 partnering with
Credit Suisse. Its two main purposes are: todefine transition as a concept; and to put
forward a framework for identifying credible
transitions aligned with the Paris Agreement,
for use of the transition label in practice.

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative2

This report covers the full spectrum of sustainable finance themes

PARIS AGREEMENT

GREEN

SOCIALSUSTAINABILITY

USD86bn
USD868bn

USD210bn
106 Issuers

90 Issuers

PANDEMIC

See page 13
1,036 Issuers
See page 11

USD75bn

447 Issuers

See Page 8

Excluded:
Performancelinked instruments
and Transition
labels

NB: Each deal only included under one
theme. Pandemic is a subset of Social but
separated for the purposes of this report.
See Appendix A for labels used in each theme.

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

See page 16

3

Executive summary
Part 1: Sustainable debt market analysis
Overall

Most even thematic split in H1 2020

The sustainable debt market has been
dominated by green, but the share of otherthemes has grown in recent years, both interms of amount issued and number of issuers.

350

Overall, the market performed strongly in
H1 2020, with over USD250bn issued versus
USD341bn for the full year of 2019.

250

Green

Sustainability

SocialPandemic

200
150
100
USD Billions

Due to COVID-19, however, the market’s
composition is noticeably different this year,with a much more even split between themes
than previously. Further, the fact that a large partof social and sustainability bond issuance in H1
2020 financed COVID-19 response measuresmeans that most non-green volumes – and likely
around half of the total sustainable debt market– financed pandemic-related investments in H1
2020. (See Methodology for more detail on our
analysis process and definitions.)

300

50
0
2014

2015

2016

2017

2018

2019

H1 2020

Highlights by theme
Green

Sustainability

Social• Green bond volumes were the most(negatively) impacted of all themes,
but there were positive signs in
the market that point to increasing
demand and better performance ofgreen vs. vanilla debt instruments.

• Sustainability bond volumes havebeen rising consistently. In H1 2020,
they achieved a similar level as 2019.

• Early impact investing strategies gave
rise to social bonds in 2006, even
earlier than their green counterparts.
Driven by COVID-19 response
measures, social bonds achieved far
higher volumes in H1 2020 than any
other full year.

• H1 2020 volumes dropped to below
half of 2019 levels in every region, withthe exception of Latin America due tocontinued sovereign issuance from Chile.
The bulk, however, came from Europe,
which represented more than half of the
global total (55%) for the first time ever.
• Globally, issuance was less affected indeveloped versus emerging markets.

• Supranationals represent most of
cumulative issuance (58%), andover three-quarters (77%) of H12020 – their highest share since2015. Otherwise, the top threedomiciles are European: Germany, theNetherlands, and Spain.
• Development banks – mainly MDBs –are the dominant issuer type, largely
driven by the World Bank. Corporates
account for a much smaller sharethan in the green bond market.

• Public sector issuers experienced asmaller decline than private sector
ones, to some extent expected given
their less flexible investment plans andlower vulnerability to market dynamics,
particularly in the short-term.

• 95% of the volume denominated in
hard currency, the same holding true
for H1 2020.

• Increasing share of top 3 UoP categories:
Energy, Buildings, and Transport.
Transport was clearly the driver, led
by rail investments from sovereigns
and government-backed entities.

Pandemic• Increased volume among the top
currencies – most of which are hard
– which may reflect the preferencefor ‘safer’ currencies in a time ofmarket uncertainty.

• Issuance came exclusively fromsupranationals in early years, then
expanding to issuers from Europe and,increasingly, Asia-Pacific. Nonetheless,both sovereign issuers are from Latin
America: Ecuador and Guatemala.
• 40% of the cumulative volume hascome from government-backed
entities, mostly European.
• Similarly to sustainability bonds,
relatively short tenors are usedcompared to the green bond market.

• Pandemic bonds emerged in China in February 2020 (according to our definition).
• Chinese issuers made up an overwhelming majority of pandemic-themed bondissuance, with nearly 90% of volume and 441 out of 447 issuers. Supranational
issuance is the next most common.
• Issuance is dominated by non-financial corporates, with several industry sectors
represented.
• Almost all volume is short-dated. 96% has a tenor of five years or less.

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

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Part 2: Policy and market development
Evolving market
The sustainable debt market, including thebreadth of instruments available to issuers
and investors, is evolving. Labelled securities
will continue to play a major role, and are
already expanding their coverage beyond‘traditional’ green, social and sustainability
debt to capture more transition investments.
They will be complemented by others, such as
performance-linked instruments.
Linked to this, work to develop sustainablefinance has intensified noticeably in thelast couple of years, and this will likely
accelerate given the ongoing pandemic andincreased attention on sustainability themes.
Important breakthroughs have been madeon the adoption of taxonomies to determine
whether investments contribute to climatechange mitigation or other environmental
objectives. The EU and China, whichcollectively account for approximately
35% of global GHG emissions, respectively
published the EU Taxonomy and PBoC Green
Bond Endorsed Projects Catalogue (the latter
originally launched in 2015 and updated andreleased for consultation this year). Suchdocuments can serve as the blueprints forthe net-zero GHG emissions economy wemust rapidly transition towards.
Other players, such as stock exchanges,
central banks and other regulators, arealso increasingly involved around theworld, including through the creation ofcollaborative networks to share knowledge
and implement joint initiatives. One example
is the Network for Greening the Financial
System, and we cover many more in Part 2.
Even so, there is clearly still a need to
do much more to structurally integrate‘sustainability dimensions’ into the core of
economic activities and decision-making.

An opportunity born out ofnecessity
If climate change and wider environmental
degradation are not enough to motivatebolder action at scale, perhaps theimmediate and global danger of COVID-19
will unite the international community undera shared understanding of the IPCC’s 1.5°C
report and its urgent call to mitigate (andadapt to) climate change.
The need to kickstart economies worldwide
presents a valuable opportunity for change
through the ‘build back better’ agenda. To
achieve this, governments can use their own
balance sheets or make efforts to reduce thecost of private capital through various formsof financial support and policy measures.
This may include an increased use of labelleddebt among governments and other public
sector issuers – by labelling debt, as several
sovereigns have already done, governments
could send a clear market signal while
contributing to the development of domestic
sustainable financial markets, and attracting
a more diversified investor base.
Their ability to do so, however, will largely
depend on fiscal constraints. For many DM
countries, this should not pose a significant
problem given record low interest rates andrelatively strong debt affordability.
Furthermore, the pandemic has
maintained or even reduced the alreadylow interest rates at which many DM
governments can borrow, while increasing
the risk premium paid by private sector
players as well as countries perceived as‘riskier’. EM countries are therefore likely
to have it harder, which is exacerbated by
the fact that emerging economies are also
already suffering from severe drops in FDI
as a result of the pandemic.

In any case, it is critical that recovery plansinclude alignment with long-term emission
reduction goals, factor in resilience toclimate impacts, slow or stop biodiversity
loss, and increase circularity of supply
chains. Green stimulus programmes could
help to restart economies while reducing therisk of future recessions caused by climatechange and/or degraded ecosystems (suchas pandemics).

The bigger picture
Beyond stimulus measures, however, there
is a clear need to ‘think bigger’ if we areto achieve the structural transformation
required to align economic health withsocial and environmental health. One mightargue the existing set up has fuelled successso far; in some ways this might be true, buta system that leads to its own destruction
ultimately cannot be considered successful.
The wider policy landscape must evolve.
Central banks, for example, must work
closely with finance ministries to set a
post-COVID recovery that integrates the‘build back better’ agenda of green stimulus
packages – for instance, through targetedpurchases of ‘green-resilient’ assets andpreferential loans complementing the
progress being made on climate and otherrisk assessments. This will need to besupported by broader economic policy andinitiatives by regulators, stock exchanges,
financial institutions, and related networks.
Negative shocks such as COVID-19 arehere to stay. The question is for how long,and to what extent. And that depends on
our response.

GREEN

SUSTAINABILITYPANDEMIC

SOCIAL

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

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Part 1: Sustainable debt market analysis
Introduction
The intensified perception of and concern
for environmental threats has permeatedthe financial sector and given rise toa variety of financial instruments thatprovide environmental and social, benefits
alongside financial returns. Such instruments
demonstrate the potential for financial
markets to fund solutions to global problems
such as climate change and COVID-19.
The majority of this has come in the form oflabelled debt, predominantly through bonds
and loans. Within these, an array of labels
and structures can and have been used,typically at the issuer’s discretion.
The diversity of labels continues to grow with
COVID-19, for example, creating shifts in theuse of sustainable debt instruments.
In the last ten years, Climate Bonds has
worked almost exclusively on developing
green finance. While we continue to focus
on green, it is impossible to ignore theinter-relationships between environmental
and social issues, even more so given the
Sustainable Development Goals (SDGs).
In this context, we have been expanding
our data coverage to other labelled debt
instruments – particularly sustainability
and social bonds – and a separate database
covering these will be launched in 2020.

Scope of analysis
Due to this unprecedented year, we havebrought forward an evaluation of the broader
sustainable debt market (including all years)
to supplement a deeper-than-usual interim
analysis of H1 2020 green bond issuance.
We cover three overarching sustainabledebt themes based on the projects/activities
financed: Green, Social, and Sustainable.
However, 2020 has seen the emergenceof deal labelling related to the pandemic.
Being health-related, this would normally sit
under the Social theme, but given the scaleof issuance and the significance globally, we
consider Pandemic a separate theme for thethis report.3 We therefore use the following
themes:Green: dedicated environmental benefits(tracking began 2012)
Social: dedicated social benefits (tracking
began 2020)
Sustainability: includes green and social(tracking began 2020)

It is important to note that this paper
analyses labelled debt financing. Unlabelleddeals may also finance a range of sustainableprojects but are not the focus here. Our
upcoming report on climate-aligned issuers
explores this topic for the green theme.
Finally, the comparison versus previous years
for the green theme is only indicative. Theremay be seasonal variations which prevent
full year on year comparability. For thisreason, we have prioritised analysis in termsof relative changes in amount issued (i.e. %shares) over absolute changes.
For reference, the USD91.5bn issued in H1
2020 represents a 65% drop versus the
USD258.9bn total in 2019 or a 28% drop
versus H1 2019.

Methodology overview
For the purposes of our work and this report,
the sustainable debt market is defined by debt
instruments that (a) have a label, and (b)finance sustainable projects/assets.
Debt labels describe the type of projects
financed or their benefits. ‘Green’, ‘social’and ‘sustainability’ labels are the mostcommon in each theme, but a wide range isused (see Appendix A).4
Green
All deals in green theme have been
screened for ‘greeness’. Screening is basedon the Climate Bonds Green Bond Database
Methodology5 using the following two criteria:• Deal must be labelled• All net proceeds must meet Climate
Bonds’ definitions of green (based on
Climate Bonds Taxonomy)6
Thus, for green debt instruments we review
the green credentials of the activities financed.
Other
For other themes, the use of proceeds has
not been screened. For now, the label is the
only prerequisite. Which theme the deal is independs only on the label, as follows:
Sustainability: label describes a combinationof green and social projects. e.g. Sustainable,
SDG, SRI, ESG, etc.
Social: label is exclusively related to social
projects. e.g. Housing, Gender, Women,
Health, Education, etc.
Pandemic: label is exclusively related to the
COVID-19 pandemic. e.g. COVID-19, Fight
COVID-19, Response, Pandemic, etc.
Thus, if a bond only finances green
projects, it is included in the Green theme
regardless of its label. On the other hand,a sustainability-labelled bond that only
finances social projects is considered as
Sustainability. Due to this, our analysis ofother themes is merely an indicator of capital
markets funding aimed at each theme, basedon the deal label (see Appendix B).

There are two exclusions to the data
Performance-linked instruments

Transition labels

A recent development pushing theborders of sustainable finance beyond
the use-of-proceeds model is the growthof performance- or KPI-linked debt
instruments. As opposed to financing a
specified pool of assets and projects, these
instruments raise general purpose financebut the coupon/interest rate is tied to theissuer meeting predefined, time-bound KPIs.

Transition finance refers to investments thatare not yet low- or zero-emission (i.e. notgreen) but have a short-term role to play indecarbonising an activity or supporting an
issuer in its transition to Paris Agreementalignment. This widely debated concept is built
on the premise that “transition bonds” can filla market gap by extending the labelling to amore diverse set of sectors and activities.

CBI does not yet hold comprehensive
data on performance-linked loans (only ahandful of issuers have used the format
in a bond so far), preventing analysis
at this stage. We are planning to havefull coverage of performance-linked
instruments in 2021.

Many of the candidates are currently highly
polluting, hard to abate, and do not fallwithin existing sets of green definitions but
are key to meeting global climate targets.
Examples include extractives like mining;materials such as steel and cement; andindustrials, including certain types oftransportation, e.g. shipping and aviation.

Pandemic: deals with COVID-19 related labels

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative6

Sustainable debt market overview
The infographic on page 3 shows asustainable debt market dominated by green.
However, the share of other themes has
clearly been growing, both looking at amountissued and number of issuers (see below).
2020 has seen the overall sustainable debt
market growing, with a total half-year figureof over USD250bn versus USD341bn for thefull year of 2019. However, its composition isnoticeably different, with a more even split
between themes than previous years. The
pandemic theme, which only emerged thisyear, is the second-largest in 2020 and alreadyalmost as large as the entire social theme. The
447 issuers of pandemic bonds are also morethan double the 221 green bond issuers in 2020.
Further, given that a large part a large part ofsocial and sustainability bond issuance in H1
2020 financed COVID-19 response measures,
it can be concluded that most non-green
volumes – and likely around half of thetotal sustainable debt market – financed
pandemic-related investments in H1 2020.

In 2020, the first pandemic bond was issued
on 5 February, a RMB1bn (USD143m) deal by
Zhuhai Huafa Group from China. Pandemicthemed issuance peaked in February andhas declined since. Meanwhile, there weresignificant drops in all other issuance inFebruary and March as COVID-19 spread,
although volumes rebounded in April.
Green volumes were clearly impacted mostof all. In H1 2020, issuance was well under
half the size of 2019. The largest drop came in
March, with monthly issuance subsequently
failing to rise above pre-March levels. Evenso, there were positive signs in the green
bond market that point to increasing demandand better performance among green debt
instruments. For example, our pricing researchsuggests that green bonds experienced record
levels of book cover and spread compression
in the primary market, and on average
performed better than vanilla equivalents
and indices in the secondary market (see theH1 2020 Green Bond Pricing report).7

The spike in the sustainability theme in April
was due to sizeable issuance by the World Bank
(USD14.7bn from six deals) and a USD4.25bn
deal by the Inter-American Development Bank
(IDB). Among the World Bank’s six deals wasa record-breaking USD8bn issue, the largest
ever deal across all themes. While labelled‘Sustainable Development’ and included in
the Sustainability theme, the proceeds were
financing COVID-19 response measures; thesame is true of the IDB’s bond. The spike in
Sustainability-themed bonds in April can bebroadly attributed to COVID-19 investments
outside of China. In China, more robust guidanceon issuing pandemic bonds from the PBoC has
led issuers to largely use pandemic-related
labels to finance COVID-19 expenditures.
The World Bank and IDB deals are twogood examples of financing for COVID-19
response measures not included under the
pandemic theme due to the label used;
another is the USD1bn social bond issued by
Bank of America in May.

Amount issued (USDbn)

Most even split in H1 2020; Green volume fell most in March
350

35

300

30

250

25

200

20

150

15

100

10

50

5

0

0
2014

2015

2016

Green

2017

2018

2019

Sustainability

H1 2020

Jan

Social

Feb

Mar

Apr

May

Jun

Pandemic

Number of issuers

Pandemic represents >60% of issuer count in H1 2020; Issuer count less volatile than volume
750

250

600

200

450

150

300

100

150

50

0

0
2014

2015

Green

2016

2017

2018

Sustainability

2019

H1 2020
Social

Jan

Feb

Mar

Apr

May

Jun

Pandemic

NB: ‘Number of issuers’ reflects the number of issuers in each individual theme. Some issuers ‘appear’ in more than one theme (see Methodology).
Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

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Thematic deep dives
Europe >50% of issuance for first time

Overall, however, the bulk of issuancecame from Europe. The region represented
more than half of the global total (55%)
for the first time ever. Two-thirds (63%) of
European issuance stemmed from nonfinancial corporates and government-backed
entities, more than the usual 40-45%.

0
2014

2015

2016

least 80%, while issuers from Malaysia, New
Zealand, Thailand, and Saudi Arabia have yet
to come to market in 2020.
Green bond issuance was less affected indeveloped markets (DM) versus emerging
markets (EM).9 DM volumes reached theirhighest (81%, 72% in 2019) and EM theirlowest (13%, 23% in 2019) shares yet, while
Supranational issuance increased slightly to
6% (5% in 2019). This is somewhat expected
given that pandemic-related expenditures
take special priority in EM (including at theexpense of green), whereas in several moremature DM markets green investment is‘stickier’ and thus less vulnerable to shocks.

2017

2018

2019

H1 2020

Like previous years, Europe dominates theremaining top issuer domiciles, with the
Netherlands and Germany followed by Spain,
a top five for the first time. Spain derived
almost half of its volume from deals by
Iberdrola and Banco Santander.

Countries

The bottom half of the top 15 features someless expected countries. Chile, Portugal,and Luxembourg entered this group for the
first time, respectively driven by issuancefrom the Republic of Chile (USD3.7bn),
EDP (USD1.7bn), and CPI Property Group(USD1.3bn). The fact that the volume in eachis still dominated by a single issuer suggests
these countries’ green bond markets
still have much to develop, but these arecertainly positive signs.

The USA and France comfortably make up thefirst two places in the issuer domicile ranking,although their volume is still less than halfthat of 2019. The most evident change in the
ranking is the drop of China, which has fallen
to 7th place (excluding Supranational). No
doubt this is partly due to China having been
hit by COVID-19 earlier than other countries,
and thus also likely having spent relatively
more on pandemic-related investments (atthe expense of others, such as green).

The comparison of amount issued withissuer count reveals striking differences
between some countries. The USA,
Sweden, China, Japan, and Norway havea relatively high number of issuers while
France, Netherlands, and most notably Chile
experience the opposite. Issuers from ‘Other’countries tend to be relatively small, whichmakes sense given that the vast majority oflarge issuers are from countries with maturegreen bond markets.

European domiciles move up the ranking in H1 2020
20

North America remained relatively stable.
Its 66% decrease was in line with the overall
65% decline and to a large extent driven
by lower Fannie Mae (FM) issuance, which
totalled USD2.6bn from 90 deals.

15

USD Billions

Apart from Africa, which had no issuancein H1 2020, Asia-Pacific was the weakest
region, with only USD12bn compared to the
USD64bn in 2019. Although this was mainly
due to the large drop in Chinese issuance,various other countries in the region also
experienced sharp falls. Australia, India, thePhilippines, Singapore, South Korea, Hong
Kong, and the UAE all had volumes decline at

50

40
Amount issued

Issuer count

30

10

20

5

10

0

0

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

Number of issuers

Volumes in H1 2020 dropped to below halfof 2019 levels in every region. The exception
was Latin America, whose USD4.5bn is very
close to the USD4.7bn achieved in 2019 due tocontinued sovereign issuance by the Republic ofChile. Subsequent deals from LatAm in H2 havealready taken issuance well above 2019 levels.

Europe

d
No a
rw
Po ay
Lu rtu
xe ga
l
m
bo
ur
g
O
th
er

Regions

Latin America

UK

This dive into green is meant as an interim2020 update in a markedly different year.
It digs deeper than our usual H1 Summaryand highlights the asymmetric impacts of
COVID-19 on different market features.8

Africana• Important market and policy
developments, most notably further workon market harmonisation through the EU
Taxonomy and Green Bond Standard

North AmericaCa• 8 new issuer domiciles and 291 newissuers, including debut sovereigns fromthe Netherlands, Chile and Hong Kong

200

US
A
F
Ne ranth ce
erlaGe nds
rm
an
y
Su
S
pr pa
an in
at
io
n
Sw al
ed
en
Ch
in
a
Ja
pa
n
Ch
ile

• All regions and most issuer types and UoP
categories growing

Asia-Pacific100
USD Billions• Record issuance, topping USD200bn &USD250bn for the first time

Supranational

150

Green
As covered in our recent Green Bonds Global
State of the Market 2019, last year saw:

250

8

Issuer types

Public sector issuers increase share

Overall, public sector issuers experienced asmaller decline than private sector ones, which
to some extent is expected given they often
have less flexible investment plans and are lessvulnerable to market dynamics, particularlyin the short-term. A large rail project financed
and developed by a state-owned enterprise,for example, is less likely to be postponedor cancelled due to COVID-19. Furthermore,some public sector issuers, namely governmentbacked entities, are dedicated entities operatingin specific sectors, especially related to longterm infrastructure projects and unable toredirect their funding to other project types.

100%

Indeed, government-backed entities haveremained robust in the face of the pandemic,
with USD22bn in issuance, well over half
the USD35bn for the full year of 2019.
SNCF (USD5.3bn), SNCF (USD1.4bn), andEUROFIMA (USD909m) were the largest
issuers in this group, and all finance rail
projects. If the trend continues, governmentbacked entities are set to comfortablyachieve record green bond issuance in 2020.
Sovereigns were the next most ‘resilient’issuer type, also issuing more than half of2019 volumes (USD13bn vs. USD25bn).
France (USD5.1bn), Chile (USD3.8bn), andthe Netherlands (USD3.4bn), Indonesia(USD750m), now a regular issuer, andLithuania (USD53m), which returned tomarket after its 2018 debut, were the fiveissuers. After tapping its 2033 bond in 2019,
Belgium hasn’t returned to market this year.
Among private sector issuers, nonfinancial corporates proved less volatile
than financials in H1 2020. Non-financials
remained the top issuer type, increasing theirshare to 25% from 23% in 2019. Financial
corporates, which dropped 71% driven bymuch lower issuance from Chinese banks,
were among the most impacted issuer types.
Apart from securitised deals (ABS),
development banks were the worst hit, falling
82% to attain a 6% share compared to 11%
in 2019. However, this was largely driven bymuch lower volumes from national institutions
over multilateral development banks(MDBs). Issuance by national developmentbanks – such as KfW, FMO, Swedish Export
Credit, China Development Bank, etc – fell
dramatically from USD15bn (2019) to USD1bn(H1 2020), with no issuers from China or the
rest of Asia coming to market.10
Finally, loans – almost always obtained byprivate sector entities – fell 73% to USD3bn
while ABS experienced the largest decline(-86%) due mainly to a substantial drop in
Fannie Mae (FM) issuance (USD2.6bn vs.
USD22.8bn last year).

75%
50%
25%
0%
2014

2015

2016

2017

2018

2019

H1 2020

Sovereign

Loan

Development Bank

Non-Financial Corporate

Government-Backed Entity

ABS

Local Government

Financial Corporate
likely to be affected by a pandemic
outburst, especially in the short-term
and a continuing environment of very low
interest rates. They are also more likely to
involve long-term planning and be harder topostpone, and, in the case of Transport, arelargely financed by state-backed entities lesssubject to market volatility. Similarly, but toa lesser extent, investments in renewableenergy seem to have been hit slightly lessthan the overall market.

The profile of issuer types may evolve in H2
2020. Changes could arise if private sector
entities manage to rebound versus the
public sector, and national and international
recovery packages could also have an impact
depending on when they materialise andhow much of the debt is labelled green.

Use of proceeds (UoP)
In our 2019 report, we highlighted theincreasing share of the top three UoP
categories: Energy, Buildings, and Transport.

Financing for large infrastructure-based
projects could therefore be affected
more the longer the impacts of COVID-19
are felt, but we expect the greater
understanding of links between socialand environmental impacts, combinedwith various planned green recovery
packages, to counter this effect.

This consolidated in H1 2020, with the shareof the top three increasing to a record 87%.
Led by rail investments from sovereigns andgovernment-backed entities, Transport was
clearly the driver, achieving half of 2019
volumes (50% drop) while Energy and
Buildings respectively fell 62% and 71%.

Other UoP categories, although muchsmaller, experienced more significant dropsof at least 70%.

Large, long-term infrastructure projects –most Transport investments – are the leastTop 3 UoP categories reach record 87% share
100%

75%

50%

25%

0%
2014

2015

2016

2017

2018

2019

EnergyBuildings

Transport

Water

Land use

Industry

ICT

Unspecified A&R

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

H1 2020

Waste

9Currency

EUR rises while USD and RMB fall

The green bond market’s currency profile
remained broadly similar, but with increased
volume among the most used currencies(most of which are hard). This may reflect
the preference for ‘safer’ currencies in a timeof market uncertainty.

100%

The contribution of hard currencies
increased to 87%, the highest level since2015. The share of the top three – EUR, USD,
and RMB – also grew versus 2019, from 81%
to 83%, but this is below the 84%-90%
achieved between 2015-18.

50%

The share of the top eight currencies
share rose to 97% from 94% last year.
Its composition was relatively unchanged,
the only difference being the entry of NOK(8th place), replacing AUD (6th in 2019).
AUD volumes fell from USD5.4bn last year
to a mere USD113m in H1 2020, with only
two Australian issuers coming to market –Queensland Treasury Corporation and Local
Government Super – and no issuers fromoutside the country issuing in AUD.

Deal size
The trend in deal size profile is acontinuation of what we have seen in thelast few years: a gradual increase in theshare of larger, benchmark-sized deals(USD500m+). Versus 2019, the proportionof the USD500m-1bn and USD1bn+ ranges
respectively grew from 32% and 28%, to
37% and 31%, while dropping for USD0100m and USD100m-500m deals.
Curiously, this is coupled with decreasing
average and median deal sizes. The
comparison is not like-for-like given thatthe average and median exclude Fannie
Mae, but it does suggest there is a growing
number of small deals despite larger ones
accounting for a greater share of the market(which seems to be driven by an increasing
number of very large deals, especially fromsovereigns and government-backed entities).
*Average and median deal sizes exclude Fannie
Mae due to its high frequency of small deals,
which skews figures.

25%

0%
2014
EUR

USD

2015

2016

2017

RMB

SEK

JPY

External reviews

2018
GBP

2019
CAD

H1 2020NOK

OtherMonthly analysis suggests the share of SPO
remained fairly constant throughout H1. On
the other hand, there was an uptick in issuancewith no external review after March, with
71% of the amount without external review(USD5.9bn of USD8.3bn) issued between
April-June. This would make sense given theeffects of COVID-19, including on the ability of
external reviewers to provide a service.

We see a changing profile of external reviews
in 2020, with SPO clearly gaining share.
They accounted for 83% of issuance in H1
2020 versus 60% in 2019 – itself a relatively
high share – as they become the norm in amarket that increasingly ‘demands’ someform of external review.

SPO at highest share yet
100%

75%

50%

25%

0%
2014
None

2015

SPO

2016

2017

Certification

2018

Assurance

2019

H1 2020

Green Rating

Multiple

Benchmark size keeps growing
100%

350

80%

280

60%

210

40%

140

20%

70

0%

0
2016
0-100m2017
100-500m

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative2018
500m-1bn

2019

H1 2020

1bn or more

Average*(Average & Medium) USD Millions

The strongest performer in this group
was by far EUR, whose USD50bn wasclose to half the USD108bn of 2019 and
54% of the overall volume in H1 2020. This
represents the EUR’s highest ever sharesince 2007. Meanwhile, both USD- and
RMB-denominated issuance dropped morethan the overall market (respectively 73%
and 78%). The substantial fall in USD
volume was partly due to lower Fannie Mae
issuance, whereas the decline in RMB isunsurprising given the very weak all-roundvolume from Chinese issuers.

75%

Median*10

MDBs step up sustainability issuance
70
60
50

Sustainability

Similarly, and most prominently, MDBs
utilise sustainability bonds as a key financing
mechanism to achieve environmental goals
whilst simultaneously advancing humandevelopment. MDBs are responsible formore than half (58%) of all sustainability
volume issued to the end of H1 2020, whichamounts to a grand total of USD210bn.
The development of the sustainability segmentof the market was marked by the release of the
Sustainability Bond Guidelines (SBG) by ICMAin June 2018.11 The SBG extend good practicerecommendations around transparency
and market integrity, drawing upon thegreen project categories of the Green Bond
Principles (GBP) and the social categories of
the Social Bond Principles (SBP).

40
30

Asia-PacificNorth America

AfricaLatin America
Europe20
USD Billions

Sustainability bond issuance continues toreach new heights in 2020. The category
encompasses a variety of labels related to ahost of environmental and social objectives,often characterised by – and mapped
against – the SDGs. The sustainability label
is arguably more suitable for some issuers
than its green counterpart due to the broader
range of potentially eligible use of proceeds
categories. Corporate issuers in a variety
of industry sectors are leveraging this tomeet overall company-level sustainability/ CSR objectives, which often span issues
like income (in)equality, decent workand livelihoods, and health and wellbeing
throughout the corporate value chain.

Supranational

10
0
2014

2015

2016

2017

Regions
Until 2014, sustainability bonds were
issued exclusively by European entities,
which now make up just over a quarter of the
cumulative volume and six out of the top 10
countries discussed below. Supranational
issuers joined the sustainability bond racein 2014 with volumes driven, for example, bylandmark deals from the World Bank. They
accounted for 77% of the total issuance in H1
2020. This is a reflection of MDBs stepping up
their efforts to maintain the progress madeon sustainability issues, especially given
the myriad economic and social effects of
COVID-19, including attempts to address theinterlinkages between climate change andinfectious diseases.12
The Asia-Pacific (APAC) region has grownsince the inaugural deal from the region in
May 2016, a USD300m senior unsecured
sustainability bond financing a mix of green

2018

2019

H1 2020and social categories by Turkish development
and investment bank Turkiye Sinai Kalkinma
Bankasi.13 The Development Bank of Japanfollowed with a USD-denominated benchmark
to finance on-lending to companies
and building projects meeting a set ofenvironmental and social criteria.14 APAC now
represents 10% of total sustainability volumes.
North America’s share has been small todate, reaching a cumulative 4% as at theend of H1 2020. Despite its small deals,
the region boasts an impressive 25 issuers(21 from the US, 4 from Canada). Close tohalf of these (12) are local governments orgovernment-backed entities.

Countries
The top three sustainability bond issuing
domiciles all hail from Europe: Germany(USD13.3bn), the Netherlands (USD12.2bn)
and Spain (USD8.7bn).

European domiciles dominate again, but under different ranking
20

20

10

10

5

5

0

0

at
i
Ge onaNe rm lth any
er
la
nd
s
So Sp
ut ai
h n
Ko
re
a
US
Fr A
an
Be ce
lg
iu
m
Ja
pa
n
U
Au K
st
ra
Ca lianadaCPh hilli ina
pp
in
es
Ch
M ile
al
ay
s
M ia
ex
ic
Tu o
rk
ey
Ita
Au ly
st
r
Ne Sw ia
e
w de
Ze n
a
Co lanlu dmTh biaa
Sw ilaitz nder
Si lan
ng d
ap
o
Ni re
ge
ria

15

Number of issuers

Issuer count

Su

pr
an

USD Billions

Amount issued
15

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative11

An interesting example from Germany is thelarge textile, homeware, and appliance retailer
Otto GmbH & Co KG, whose total USD442m
sustainability volume helping to financethe purchase of responsibly produced andsourced cotton and wood products.15
The largest deals from Germany come fromthe North Rhein-Westphalia (Land NRW)
state government. Land NRW has issued
a total of USD9.6bn (or just under 75% of
overall German sustainability volume) tofinance categories including education andresearch; inclusion and social coherence; andsustainable urban development.16
Notable Dutch issuers include, for instancegrocery retailer Ahold Delhaize, which entered
the market in July 2019 with a EUR600m/
USD678m deal to fund the procurement ofsustainably produced products, reduce thecompany’s climate impact, and to promotehealthier eating.17 The largest sustainability
bond issuer in the Netherlands is BNG
Bank (NV Bank Nederlandse Gemeenten),a dedicated public sector lender, whose 15
sustainability bonds (total USD10bn) issued
between 2015 and 2020 have financed
projects adding to three main pillars of ‘capital’:
ecological, social-cultural, and economic.
Spain’s sustainability bond issuer pool to theend of H1 2020 was exclusively comprisedof local governments. The Community of
Madrid issued the most deals as well as thelargest individual deal (eight deals, largest
EUR1.3bn/USD1.4bn). Madrid’s sustainablefinancing spans climate change mitigationand initiatives aimed at fostering social
development in the Spanish capital’s region.
The remainder of the top five country list
branches out into other regions: South Korea
ranks fourth, in part due to a USD500m
sovereign sustainability bond issued in June
2019, which was the first of its kind. The
remainder of South Korea’s sustainability
volume comes from financial corporates,
including KEB Hana Bank, Kookmin Bankand Woori Bank – all within the five largest
domestic banks in the country.
The US follows in fifth place, driven in largepart by several large non-financial corporate
issuers, including three-time sustainability
bond issuer Starbucks (total USD2.3bn).
The company’s sustainability funding focusedon categories including the sustainablesourcing of coffee, and loans to coffee farmers
via the USD50m ‘Global Farmer Fund’. The
latest US corporate entrant – and the world’s
first biopharmaceuticals company to doso – was Pfizer in March 2020 (USD1.3bn).
Its funding will be directed to improving
underserved communities’ access to medicinesand vaccines, as well as natural resource
conservation and waste reduction efforts.18

Share of corporates much smaller than in green
Non-Financial
Corporate 7%

Sovereign 0.2%

Local
Government
15%
GovernmentBacked Entity
3%

Financial
Corporate
12%

Issuer types
As noted, a substantial chunk of the
cumulative sustainability volume comesfrom development banks. A prominent
example is the European Investment Bank
(EIB) – also a regular issuer in the green
bond space through its longstanding Climate
Awareness Bond (CAB) Programme –which began its Sustainability AwarenessBond (SAB) issuance programme in 2018.
Although the only eligible projects for its
SABs were initially in the water infrastructureand health and education categories, theframework’s eligibility pool will be extended
to allow lending to projects and assets
related to a number of other categories inline with emerging EU legislation.19 EIB’ssustainability bond volume amounts to
USD19.9bn equivalent.
The World Bank is the largest sustainability
bond issuer, with USD96.3bn total volume.
It has also issued the largest individualbond to date (USD8bn, April 2020), which
carried a ‘Sustainable Development’ label
despite financing the COVID-19 response
and recovery via various health programmes.
This demonstrates that the myriad labels
and uses of proceeds can have considerable
overlap, and that classifying instruments
into different themes is not always
straightforward.
The third-largest issuer in this category is theInter-American Development Bank (IDB),
with a cumulative volume of USD6.6bn.
Local governments follow with 15% of
cumulative volume. The largest issuer
is again Land NRW, whose March 2019
EUR2.3bn (USD2.6bn) deal is also thelargest of the category. Other familiar names

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

Development
Bank
63%

appear in the top three: the Community of
Madrid and Ile de France are the second
and third-largest issuers respectively with
USD5.7bn and USD3.5bn, respectively.
Headline sustainability bond issuers in
the government-backed entity segment
include, among others, the Japan Railway
Construction and Technology Agency(JRTT), which is also a green bond issuer
under the Programmatic Certification
scheme of the Climate Bonds Standard.20
JRTT’s sustainability volume amounts to a
total USD1.3bn equivalent. The largest deal,of AUD1.8bn (USD1.2bn), was brought tomarket in November 2019 by Australia’s
New South Wales Treasury Corp – another
Certified Climate Bond issuer.21
In the corporate space, financials issue
sustainability bonds slightly morethan their real economy counterparts.
Australia’s ANZ issued the largest deal
with its Tier 2 SDG bond, which came tomarket in late November 2019 (EUR1bn/
USD1.1bn). BNG Bank – also the largest
Dutch issuer – is number one in this category
with USD9bn total volume. Among nonfinancial corporates, Pfizer’s deal is thelargest, whereas Starbucks boasts the mostcumulative issuance volume.
Despite their small share in the issuer
type mix to the end of H1 2020, sovereign
sustainability bonds are gaining traction.
After the Republic of Korea pioneered
this instrument type in mid-2019, a totalof USD3.6bn additional volume has
followed from Q3 2020 deals by Thailand,
Mexico and, most recently, Luxembourg,
which issued the first European sovereign
sustainability bond (these are not included inthis report’s figures). 22
12

Currency

Many very large deals in H1 2020

Cumulatively, 95% of all sustainability
bond volume is denominated in hardcurrency, and the same holds true forH1 2020. USD and EUR are the mostpopular currencies, comprising nearly
80% of cumulative volumes. The largest
USD-denominated deal is from Pfizer(USD1.3bn), whereas the top EUR deal
comes from France’s Action Logement
Services (EUR1bn/USD1.1bn), financing
energy efficient social housing projects
across the country.

100%

The next most popular denominations
include GBP (8%), CAD (3%), and
AUD (2%). The World Bank also shows
up prominently in providing currency
diversification to the sustainability universe,
being responsible for the largest deals in all of
the remaining top five currencies: GBP1.8bn(USD2.3bn, February 2020); three CAD1.5bn(USD1.1bn) deals (January – July 2019); andAUD2.6bn (USD1.9bn, February 2019).
The less frequently appearing currencies
generally match those of the green bonduniverse with the exception of the RomanianLeu (RON), which is a new addition in thissegment: the World Bank issued a RON
denominated bond (20m/USD5m) in
February 2018.

75%
50%
25%
0%
2014
0-100m2015
100-500m

2016

500m-1bn

With early impact investing strategies
giving rise to the concept of ethical and‘socially responsible investment’ (SRI),
labelled bonds under the social theme havebeen around for even longer than their green
counterparts. The inaugural deal of the social
bond universe carried a ‘vaccine’ label andwas issued by the supranational International
Finance Facility for Immunisation (IFFIm) in
November 2006 (USD1bn).
Other early movers also emerged from the
MDB space: for example, IFC issued the firstbond carrying a “social” label in November
2013 (TRY164m/USD81m) as it launched its
Banking on Women (BOW) Bond Programme,
focused on creating opportunities for women
entrepreneurs in EM.23 Spain’s Instituto de
Crédito Oficial followed in 2015 and again
in 2016, with the two deals amounting to

2018

2019

H1 2020

1bn or more

Deal size

Tenor

Most global cumulative sustainability bondvolume (84%) has come to market via
benchmark-sized instruments (USD500m
or above). The largest category of USD1bn
or more prevails, with just under two-thirds(64%) of cumulative issuance. This size
bucket has so far been the most prevalent also
in 2020, with a sizeable jump from around
50% in previous years to over 80% this year,
driven by large development bank deals –most notably the USD8bn World Bank bond.

The sustainability labelled universe ischaracterised by shorter-term bonds:
nearly half (47%) of the cumulative volume
has a tenor of up to 5 years. A further 35%
has a term of issuance has a term of between
five and 10 years.

Smaller deals are rare, with the 0-100m and100-500m categories combined only making
up 16% of cumulative issuance.

USD1.7bn equivalent and funding credit lines
to eligible Small and Medium Enterprises(SMEs) in regions across the country.

Social2017

The creation of ICMA’s Social Bond Principles
in 2018 fostered the expansion of social
bond issuance globally across different issuer
types by providing clarity on eligible project
categories and a comparable transparency
and disclosure framework to that of green
bonds in the GBP. Prior guidance for social
bonds had been released by ICMA in 2016, andinstruments following the earlier guidelines
are considered aligned with the SBP.
The largest social bond to date (EUR4bn/
USD4.5bn) was brought to market by debut
issuer Unédic Asseo, France’s unemployment
insurance management body, in June 2020.
The bond’s proceeds were allocated toextending unemployment programmes inFrance, but also to a special job retention
scheme to subsidise part-time employment
as part of the COVID-19 response – anotherexample of overlap within the sustainability /social / pandemic themes.24
A total of USD86bn of social themed bonds
have been issued to the end of H1 2020.

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

Longer-dated volume (10 – 20 years)
comprises 12% of issuance to the end of
H1 2020. The longest-tenor sustainability
bond is a 43-year, EUR100m/USD113m deal
from November 2018. The only perpetualswith a sustainability label come from South
Korea’s Kookmin Bank (total USD1bn, June
– July 2019).

Social Bond Principles (SBP)- what is eligible?
The ICMA SBP are aimed at outlining
guidance for issuers whose projects andassets are targeted to achieve positivesocial outcomes especially (but not
exclusively) for a target population. The
project categories include, but are notlimited to, providing and/or promoting:• Affordable basic infrastructure(e.g. clean drinking water, sewers,
sanitation, transport, energy)• Access to essential services(e.g. healthcare, education andvocational training, finance andfinancial services)• Affordable housing• Employment generation including
through the potential effect of SME
financing and microfinance• Food security• Socioeconomic advancement
and empowerment

13Regions

Countries

In the early years of the social bondsegment, issuance came exclusively fromsupranationals, which still comprise almost afifth (17%) of cumulative volume as at the endof H1 2020. The expansion of issuance fromregions started in 2015 with European issuers.
Like with green and sustainability bonds, Europe
is a prolific issuing region, making up exactly
half of cumulative social bond volume. It was
especially prominent in the earlier years; the mix
has since diversified with APAC’s share growing
to just under a quarter (24%), with big growth
spurts in 2019 and the first half of 2020 – in part
attributable to seeking relief against the effectsof the the COVID-19 pandemic.

With a strong position in the market,
France leads the country ranking insocial issuance, with 18% of cumulative
volumes. More than half of France’s
issuance comes from Unédic, whose two
deals total USD8.9bn. The Netherlands
follows in second place with USD11.2bn(13% of total) contributed exclusively by
public sector funding institutions NWBBank and BNG – both financing social
housing. Japan comes in third with 10%of the total, brought to market by 13
issuers representing a mix of issuer types.
The largest deal from Japan (JPY70bn/
USD651m) was issued by East Nippon
Expressway Co Ltd in April 2020 todevelop safer and more accessible andresilient expressways, thereby stimulating
local economies.

The Americas contribute a further 9%(LAC: 6%; North America: 3%). Notably,
two Latin American sovereigns have issued
social bonds: first Ecuador in January 2020
(USD727m), followed by Guatemala in April(USD1.7bn). Only one African issuer thus far
has issued social bonds: Mauritius’ BayportManagement (total USD340m).

020%Development
Bank
19%

Financial
Corporate
26%

GovernmentBacked Entity 40%

Issuer types
Supranational
North America
Latin America

Asia-Pacific

USD 86 bn

Local Government 3%
Non-Financial
Corporate 9%
Sovereign 3%

Spain and South Korea make up theremainder of the top five countries
with USD6.4bn (7%) and USD5.6bn(6.5%), respectively.

Europe dominating in recent years

AfricaGovernment-backed entities top
issuer type

Europe

40%

60%

80%

100%

Perhaps unsurprisingly given some social bondtrends, the issuer type mix is dominated bygovernment-backed entities at 40%. Besides
Unédic, the Dutch public funding institutions,and Spain’s Instituto de Crédito Oficial, thenext largest deals come from France’s local
government funding agencies SFIL (EUR1bn/
USD1.1bn – February 2019) and Caisse Francaisede Financement Local (EUR1bn/USD1.1bn – May2020). NWB Bank is, in cumulative terms,
the biggest government-backed social bondissuer, with USD8.8bn equivalent of volume.

Japan features highest number of issuers
15

15

12

12

9

9

6

6

3

3

0

0

Number of issuers

Issuer count

Su Fr
pr an
an ce
Ne atio
th na
er l
la
nd
s
Ja
pa
n
So Sp
ut ai
h n
Ko
re
a
US
Ge A
rm
an
y
Ita
ly
Gu U
K
a
Sa temud a
Ne i Ar la
w ab
Ze ia
al
Au andstra
Ca lia
na
da
Ch
in
a
In
In di
do a
ne
Ec siauad
Au or
M stri
au a
rit
i
M us
ex
ico
Lu C
xe hi
m le
bo
ur
Tu g
rk
Ic ey
e
Si lan
ng d
ap
or
e

USD Billions

Amount issued

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

14

Corporates contribute a further 35%, ofwhich 26% comes from financials. The
largest financial corporate issuer is France’s
BPCE Group – also a repeat issuer of green
bonds – with USD2.5bn equivalent. The top
individual deal comes from Saudi Arabia’s
Islamic Development Bank (USD1.5bn – June2020) financing projects across five eligible
categories aligned with the SBP.25 On the
non-financial side, the top issuer (USD3.7bn)
and deal both come from Japan’s East
Nippon Expressway Co Ltd – the latter as
outlined in the Countries section above.
The share of local governments stands at 9%,with issuers from the US and Japan prevailing.
The top deal is from the City of Los Angeles(USD276m, July 2018) to finance shelters andfacilities for the city’s homeless population;
the top issuer is Japan International
Cooperation Agency (USD1.1bn cumulative).
Ecuador and Guatemala are currently the
only sovereign issuers of social bonds(two and three deals, respectively).
The Ecuadorian sovereign is dedicatedto advancing the country’s affordable
housing mortgage programme, whereas
the Guatemalan framework includes a mix
of COVID-19 mitigation and containment
efforts as well as targeting social outcomesoutside the context of the ongoing pandemic.

Currency
The vast majority of social bond issuance(94%) is denominated in hard currencies.26
EUR leads the pack with a whopping 55% of
total volume, followed by USD (19%) and JPY(12%). The top five is completed by AUD (3%)
and GBP (2%), with the largest deals in thesedenominations coming from NAB (AUD500m/
USD391m, March 2017) and Lloyds Bank
(GBP250m/USD380m, June 2015).
The social-themed bond universe saw the setof currencies expand with a Macau pataca(MOP$) deal issued by the Bank of China as
an offshore bond in March 2020 (MOP1bn/

Growing share of large deals, USD1bn+ >50%
100%

75%

50%

25%

0%
2014
0-100m2015
100-500m

2016

2017

500m-1bn

USD125m). The proceeds were earmarked
for support to SMEs and microfinance for
eligible companies and entrepreneurs.

Deal size
In keeping with the sustainability-themed
universe, most social bond volume hascome through larger instruments, withbenchmark-sized transactions accounting
for 72% of the total volume.
Large deals from Unédic and others tip thebalance in favour of the largest range, and the1bn or more bracket is indeed the most common(38%). On the smaller side, bonds between
USD100m-500m contribute some 23% more,with examples from a multitude of issuers.
In June 2020, for instance, National Housing
Finance and Investment Corporation (Australia,
AUD562m/USD386m), the Ford Foundation(USA, USD300m), and the Japan Student
Services Organization (JPY30bn/USD278m)
came to market. 2016 was the first year withissuance from supranationals as well as morethan one region (APAC, Europe, and LAC).

2018

2019

H1 2020

1bn or more

Tenor
Most social bond issuance is short-dated.
Tenors of up to five years comprising
just under half (46%) of the cumulative
volume. As discussed below, a similar
trend is visible with pandemic-themedbonds; both are likely due to a need to
disburse funding more quickly than forlarge infrastructure projects and assetsthat make up a large part of the green bondfunding sphere.
Bonds with 5-10 year maturities represent
42% and the remainder is split between
10-20 years (7%) and more than 20 years(5%). The shares have remained reasonably
consistent since 2015.
As at the end of H1 2020 there were no
perpetual social bonds; however, two witha more than 40-year tenor exist: the Ford
Foundation (USD700m, June 2020 – June
2070; 50 years) and Reykjavik Social
Housing (ISK6.4bn/USD53m, March 2019 –March 2066; 47 years).

EUR accounts for >50%, JPY in 3rd

Other
KRW
CAD
NZD
GBP
AUD

EUR

0

20%

USD

40%

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

60%

JPN

80%

100%

15

Almost all volume from Chinese issuers and MDBs
SwedenSupranational
Spain
South Korea

Pandemic
Leveraging bonds to fund pandemic
responses was first seen in the WorldBank’s launch of the Pandemic Emergency
Financing Facility (PEF) in 2017. The PEF
is a type of insurance window – in partbacked by a bond sale worth USD330m –aimed at providing risk mitigation and relief
to the poorest countries in the event of apandemic.27 The Facility has come under
scrutiny for the stringency of requirementsthat need to be met for funds to be released,
which resulted in funding for the current
COVID-19 pandemic being allocated throughthe mechanism only in late April 2020.28
Using our definition of the pandemic
theme (i.e. deals with a label related to
COVID-19), pandemic bonds emergedin early 2020 as actors across the global
economy organised themselves to facilitate
an immediate, effective response to the
COVID-19 outbreak and subsequent
pandemic. The first half of the year saw a
total of USD74.9bn of such thematic bondissuance centred around the mitigationand containment of, as well as recovery
from, the virus.
The sustainable finance community reacted
swiftly and showed its support: in lateMarch 2020, ICMA published additional
communication and guidance in the form of a
Q&A for issuers to underscore the importanceand direct applicability of thematic bonds– especially social labelled bonds – inweathering the variety of pandemic-induced
societal storms across the globe.29

Corporates dominate, unlikesocial and sustainability themes
Development
Bank
14%
NonFinancial
Corporate
57%

Government-Backed
Entity 4%

Financial
Corporate
25%

China

USD 75 bn

0

20%

40%

Regions and countries
The first issuers of pandemic bonds camefrom China – likely due to the virus’s early
epicentre in the country – with the initialdeals recorded in February 2020. While thepandemic label is self-attributed, it follows
early guidance from the PBoC.
Real estate developer Zhuhai Huafa Groupwas the first with RMB1bn (USD143m) raised
to alleviate the liquidity pressure inducedby the pandemic on the company and its
subsidiaries, as well as to provide direct
relief in the form of, for example, temporary
hospitals. As of the end of H1 2020, Chinese
issuers made up an overwhelming majorityof pandemic-themed bond issuance, withnearly 90% of volume and 441 issuers out ofa total of 447. The largest Chinese pandemic
bond was the USD1.9bn deal from China
Development Bank in February; China ImportExport Bank is the largest issuer overall.
Supranational issuance is the next mostcommon (8% of total), exclusively made up
of development banks. So far, at least the
AfDB, the NIB and the Council of Europe
Development Bank (CEB) have tapped into
pandemic bonds.
Individual bonds from Spain (1.5%),
South Korea (0.7%), and Sweden (0.1%)
comprise the rest of pandemic issuanceto the end of H1.
Spain’s BBVA was the first private financial
institution in Europe as well as the inauguralissuer to bring a pandemic bond to the EUR
credit market with its early June EUR1bn(USD1.1bn) COVID-19 Social Bond. The
instrument was issued under the bank’s
existing green, social and sustainable bondframework and will provide funding toalleviate the direct and indirect social andeconomic impacts of the pandemic withcategories including healthcare, education,
SME funding, and affordable housing.30
South Korea’s Kookmin Bank issued a
USD500m benchmark in early May, withmost of the proceeds earmarked for lending
to SMEs, home offices and other small
businesses hit by the pandemic.31

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

60%

80%

100%

Sweden’s medical supplies manufacturer
Getinge issued SEK1bn (USD106m) of
COVID-19 commercial paper in April toexpand its production of ventilators andother life-saving equipment.32 So far it is
the only non-Chinese medical supplies
company to do so.

Issuer types
Pandemic bond issuance is dominated by
non-financial corporates: more than half
fall in this category. They represent several
industry sectors, including pharmaceuticals
and medical device/personal protective
equipment (PPE) providers. Examples of theformer include Sichuan Kelun Pharmaceutical
Group and Jointown Pharmaceutical Group(both with RMB2bn/USD300m equivalent
cumulative issuance) from China.
In addition, a host of essential
infrastructure and industrial companies
have utilised the pandemic label – usually
as a combination of liquidity relief to mitigate
the economic shocks as well as contributing
directly to the virus response in the formof PPE, logistics and transport support, theconstruction of temporary field hospitals andshelter, etc. Some notable examples include
the China Shipbuilding Industry Corporation(RMB5bn/USD715m, February 2020), thePower Construction Corporation of China,
Ltd (RMB3.5bn/USD498m, February 2020),
and Hunan Provincial Expressway Group
Co., Ltd (RMB2.5bn/USD360m, March
2020). Several companies operating in
China’s domestic aviation sector, including
Shenzhen, Sichuan, Spring and Xiamen
Airlines, have also leveraged pandemiclabelled financing to combat the nearcomplete vanishing of air travel in China andbeyond in the first half of the year.
Financial corporates, especially banks, makeup a further 25% of volume. More than afifth (21%) of this is contributed by China’s
Export-Import Bank. BBVA is the only nonChinese financial institution active in thismarket segment. Another Chinese financial
institution showing significant pandemic bondactivity is Hua Xia Bank (RMB7bn/USD1bn
cumulative) – also a green bond issuer.
16

The Nordic Investment Bank issued its‘Response’ bonds in April (EUR1bn/USD1.1bn;
SEK4bn/USD423m). NIB’s framework
spanned lending to the public, financial and real
economy sectors to support healthcare, social
expenditures and on-lending by governments
and financial institutions to support companies
operating in essential industry sectors.34
Fellow development bank CEB debutedin April and returned with a second‘COVID-19 Response Social Inclusion Bond’in June (EUR1bn/USD1.1bn and USD500m,
respectively). The deals fell under the
Bank’s existing Social Inclusion Framework,
the use of proceeds focusing on micro-,small- & medium-sized enterprises(MSMEs) operating in the health sector
to create and preserve jobs.35

Currency
Unsurprisingly, RMB dominates pandemic
bond currencies at 90%, with all issuancedenominated in Chinese yuan during the firstquarter of 2020. April saw entrants issuingin USD, EUR, and SEK, which respectively
make up 5%, 4% and 1% of cumulative
volumes. These deals come exclusively
from the non-Chinese issuers – including
supranationals – listed above.
The contrast of only 10% issuance in
hard currency versus more than 90% forsustainability and ‘traditional’ social bonds
again underscores the pandemic bondphenomenon primarily being a Chinese one.
Possible changes in labels and further issuerstapping into the market as the fight against
and recovery from the virus progress may see amore diverse set of currencies. Climate Bonds
will continue to monitor these developments
and report on them as part of our full 2020
coverage during the course of 2021.

Deal size
Deal sizes have varied across the first half ofthe year, with the early months seeing more
smaller deals than May and June, on average.
The cumulative shares across the first six
months show the 100-500m bracket with
50% of total volume and 100m or less at
24%. The remainder is benchmark-sized split
into 1bn or more (17%) and 500m-1bn (8%).

Lack of diversity driven by issuance from China
35
30
25
20

Amount issued (USDbn)

Development bank issuance spans several
continents, with AfDB in the lead due to its
USD3bn deal from early April 2020. AfDB
indicated it would spend the proceeds of its‘Fight COVID-19 Social Bond’ on “access tohealth and to all other essential goods, services
and infrastructure”, including water andsanitation as well as a number of emergency
lending initiatives to support job creation andmaintain livelihoods.33 China Development
Bank is the largest Chinese issuer.

15
10
5
0
February
RMB

March
USD

April

May

EUR

SEK

Contrasting AfDB’s largest deal, the smallest
until the end of H1 came from China’s
Suzhou High-Tech Zone State-Owned Assets
Operation Company, at just RMB200m(USD28.5k, February 2020).

Tenor
Almost all the thematic pandemic issuanceis short-dated, with 96% of volume having
a tenor of less than five years – the shortest
include commercial paper with a maturity of
one year. The shorter tenors are logical given
the urgency of disbursing funds at the active
stages of the pandemic, although they arealso relatively common in China (particularly
among commercial banks). Only two of thedeals issued in H1 will mature in more than
10 years: Baowan Logistics Holdings Co.,
Ltd. (RMB1.4bn/USD198m; 18 years) and

June

Prologis Investment (Shanghai) Co., Ltd.
(RMB1.9bn/USD271m; 17.8 years).
As the pandemic response progresses, themarket may well witness more long-dated debt,
especially from governments and sub-sovereign
actors that are focusing on recovering from thelonger-term impacts of the health and economic
crises. It remains to be seen which labels issuers
will adopt for these purposes.
Building resilience into societal and economic
structures can be done via any number oflabels falling under the current main themesof green, sustainable, and social – pandemic
being a subset of the last. The perspective –and objectives – matter, and project selection
will be key to this as more robust andcomprehensive definitions of resilienceemerge, and as the policy and recovery
landscape evolves.

Earlier deals (from China) smaller
100%
80%
60%
40%
20%
0%
February
0-100mMarch

100-500m

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

500m-1bn

April

May

June

1bn or more17

PART 2: Policy and market development
Part 2 of this report goes beyond the market figures in part 1 to give a detailed summary of the main policy
developments from around the world that are shaping the evolution of sustainable finance. As well as
governments, this includes initiatives by other actors, such as central banks and stock exchanges. First,
however, we take a close look at the impact of COVID-19 on policy responses and recovery mechanisms.

COVID-19 and the climate crisis
COVID-19 and the ensuing global economiccrisis have highlighted how vulnerable – andinter-related – our economic, social andenvironmental systems are globally. Due tothe virus, the year of 2020 will see the firstincrease in global poverty in over twenty
years, delaying the goal of ending poverty
even further. The economic disruption anddamage will persist as governments clamour
to stimulate a recovery.
Tied to this, there is a risk that COVID-19
could impede efforts to decarbonise our
economies, especially in the short-term as thepriority is to stem negative health impacts andenable national health systems to handle thepandemic. The International Energy Agency(IEA), for example, has already announced
that the pandemic is having a major impact
on energy systems around the world, curbing
investments and threatening to slow the
expansion of key clean energy technologies;
and this affects both developed (DM) andemerging markets (EM).36,37
Calls for a better, socially and environmentally
responsible recovery are being heard at an
exponential rate. Earlier this year, doctors andmedical professionals from around the globe
called on world leaders to stimulate a betterrecovery by investing in a low-carbon andresilient economy that would bring substantial
health, social and environmental benefits.38
In May 2020, the Energy Transitions
Commission sent a letter to governments
around the world to ‘help the global economy
recover while building a healthier, more
resilient, net-zero economy’.39
Natural capital underpins economies andlivelihoods all around the world. We will
therefore not be successful in building
healthy, green, resilient societies unless wetackle the issue head on, embedding respect
for the planet and nature in all our activities.

An opportunity born out ofnecessity
Crises like COVID-19
affect a huge numberof people and cause agreat deal of suffering,but they invariably alsopresent opportunities– it is often at times of crisis that new, betterways of doing things are born.
The severe global financial crisis just over a
decade ago presented a valuable opportunity
to rethink our systems. Yet it was largely lost,with too few structural changes implemented
as a result and many social and environmental
problems persisting, if not reinforced.
If climate change and wider environmental
degradation are not enough to motivatebold action at scale, perhaps the immediate
and global danger of COVID-19 will unite
the international community under a sharedunderstanding of the IPCC’s 1.5°C reportand its urgent call to mitigate (and adapt to)
climate change.
The pandemic presents opportunities forcompanies, and potentially policymakers,
to implement ‘back-to-work’ strategies
that align with these goals. For example, an
S&P paper from April estimated that a 7%
reduction in freight shipments in the shipping
sector and 40% reduction in business travelin the aviation sector could help align theindustries with a 2°C climate scenario by2030, while a 3-day work-from-home policyin the professional services sector wouldalign emissions from passenger transport
over the next five years.40
Furthermore, digitalisation could help
close the financing gap needed to fulfil the
Sustainable Development Goals (SDGs),
for example improving data availability andquality, enabling reduced transaction andintermediation costs, and fostering moreinnovative, efficient and circular businessmodels.41 A UN-mandated Task Force on

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

Digital Financing of the SDGs recently
warned of the need to develop principles togovern digital finance.42

Building back better, together
To achieve this will
require planning,collaboration, andvision. Governments
have a responsibility
to ensure that all
recovery investments,
grants, and other typesof spending or fiscal support, contributeto meeting the Paris Agreement and the
SDGs.43 Overall, whether through regulationor voluntary commitments, governments
must encourage transparency and drive
sustainability throughout their public
procurement activities, while also sending
clear policy signals for the private sector
to follow. Additionally, public recovery
measures should leverage the private sector– particularly in emerging economies.
Alignment on definitions will be vital, andthe taxonomic approach to setting criteria
on whether investments are aligned with
the Paris Agreement – established in China
through the PBoC Green Bond Endorsed
Projects Catalogue and the European Union
through the EU Taxonomy – is gaining
traction around the world. This will
be supported by discussion of how to‘build back better’ and related guidance,
for example through the Principles for
Recovery & Resilience developed by theEU’s Technical Expert Group on Sustainable
Finance (TEG).44
18

This report outlines various policy
developments in the green finance space.
In particular, we stress the importance of
creating a financial system that is adapted
and resilient to climate change and thephysical, biological, and transitionary risks
it entails. Particular attention is given to
key initiatives developed by market actors,
namely central banks and stock exchanges.

constraints, especially in an environment inwhich DM governments are also borrowing
heavily. In the EU, the pandemic recovery
fund may allow more indebted countries torecover with support from Europe’s larger
economies, but the lack of such a bloc
globally means that other mechanisms
are needed to prevent meltdowns in many
developing countries.

Financing the stimulus

This is exacerbated by the fact that emerging
economies are also already suffering fromsevere drops in foreign direct investment(FDI) as a result of the pandemic. According
to a recent UNCTAD report, “global FDI
flows are expected to fall sharply from2019 levels of USD1.5tn, dropping well
below the trough reached during the global
financial crisis.”51 Flows to EM have been
hit especially hard due to export-oriented
and commodity-linked investments being
among the most affected. To make mattersworse, the analysis also showed thatinternational private sector flows to four outof ten key SDG areas have failed to increase
substantially since the adoption of the goals
in 2015.

Pandemic-related
financing has taken off
in 2020, with our data
and definitions
showing USD75bn
raised throughPandemic bonds andperhaps just as much from Social andSustainability bonds as of end H1 (see Part
1). To quote another source, according
to BloombergNEF, ‘Coronavirus bonds’
had raised USD163.5bn as of June.45 The
vast majority of this financed immediate
response measures, especially in EM, but
as the near-term health impacts becomecontained, the focus will be on planning andimplementing a recovery that emphasises‘building back better’.
To drive this massive wave of investment,
governments can use their own balance
sheets, or they can make efforts to reducethe cost of private capital through various
forms of financial support and policy
measures.46 Their ability to do so, however,will largely depend on fiscal constraints.
Stimulus measures are set to sharply
increase debt burdens as nominal GDP
growth slumps and deficits widen.47 The UK’s
debt, for example, exceeded 100% of GDP in
June for the first time since 1963.48
For many DM countries, this should notpose a significant problem given record low
interest rates and relatively strong debt
affordability. Moody’s expects debt burdensof advanced economies to stabilise at higher
levels in 2021-22 if nominal GDP growth
returns broadly to pre-crisis levels.49
Furthermore, the pandemic has maintainedor even reduced the already low interest
rates at which many DM governments canborrow, while increasing the risk premium
paid by many private sector players as wellas countries perceived as ‘riskier’.50
EM countries will likely have it harder,
given many developing economies (China
excluded) started the crisis in a weaker
position and therefore less able to absorb
the fiscal cost. While DM governments
can run substantial deficits without driving
interest rates and inflation higher, most
EM economies have tighter borrowing

Development finance institutions can playa crucial role in ensuring that such action
extends to developing countries facing
higher risk premiums. Initiatives like the
EBRD’s EUR21bn Solidarity Package can becomplemented by others that integrate theprivate sector, such as the USD1bn Impact
Rescue Facility targeting SMEs in Africa,
Latin America and Southeast Asia.52,53 Thesecan be effective, especially in the short-to
medium-term, but are still likely not to beenough and will need to be supplemented
by more robust longer term solutions(potentially including debt restructuring).

Greening the stimulus
A recent OECD
report highlights theneed for ‘build backbetter’ agendas toinclude alignment withlong-term emission
reduction goals,
factoring in resilience to climate impacts,
slowing biodiversity loss and increasing
circularity of supply chains.54 Greenstimulus programmes could help to restarteconomies while reducing the risk of futurerecessions caused by climate change and/or
degraded ecosystems.
In the Philippines, for instance, where thecentral bank is the newest member of the
Network for Greening the Financial System(NGFS), the government’s recovery plan
has been criticised for not incorporating
renewable energy policies.55 It is a missed

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

opportunity to provide cleaner – and likely
more secure – energy in the country.
Governments around the world must workto achieve this with a renewed mindset andcloser engagement from market actors andcivil society alike.56
Green securities could play a major role. Bylabelling debt as ‘green’ (or ‘sustainable’),as several sovereigns have already done,governments could send a clear market
signal while contributing to the developmentof domestic green bond markets, andattracting a more diversified investor base.
These and other potential benefits of issuing‘green’ are covered in our inaugural Green
Bond Treasurer Survey 2020.57

Green recovery measures andpackages
EU Recovery PlanThe European Unionis leading the green
recovery, at scale. In
May, the European
Commission proposeda major plan – Next
Generation EU – that aims to ensure the
COVID-19 recovery is sustainable, even,
inclusive and fair for all Member States.58
Composed of several facilities, it is based on
three pillars:59
1. Supporting Member States to recover
2. Kick-starting the economy and helping
private investment
3. Learning the lessons from the crisis
30% of the EUR750bn recovery fund – theworld’s largest ever green recovery pledge– will be earmarked for climate-related
expenditure and guided by the EU Sustainable
Finance Taxonomy, which will be covered.60

19

This could entail EUR225bn in green bondissuance, which would represent an 87%
increase in the green bond market versus
2019 levels. 61
The decision on how governments spendmoney is typically a political one, evenmore so in so in an environment of highindebtedness and tight fiscal space. Since
green bonds specifically address the issueof responsible finance and long-termsustainability, they may help to increase theacceptance and willingness for an increasein debt levels as a way to stimulate growth,
especially in countries where the topic is
more sensitive.
Overall though, major EU bond issuance,
including a boost in EU green bond supply,
could encourage more green bonds from a
broader set of issuers, helping to deepen anddiversify the market.62 This would come at
the same time as the ECB puts green policy
at the top of its bond buying agenda withaggressive asset purchasing, in favour ofgreen assets.63
The pandemic recovery fund could transformthe investment landscape because fiscal
co-ordination at the core of the plan may
effectively create a sovereign fixed-income
market for the eurozone worthy.64 European
bonds, currency and stocks could becomemuch larger features of international
portfolios, with bonds benefiting particularly.
Currently, less than a quarter of European
sovereign and supranational bonds carry
triple-A ratings – the recovery programme
could increase this amount to around
EUR1.4tn. Europe’s riskier sovereign bonds
might also become sturdier investments,
not least if the recovery fund were to
succeed in sharing the costs of economic
reconstruction and easing the pressure on
the most indebted nations. If so, southern
European government bonds could
become core holdings for a broader circle
of investors. A more stable Europe anda deeper bond market would also boost
the Euro’s standing among international
investors and central banks. 65
The EU’s long-term budget, the 2021-2027
Multiannual Financial Framework, wasproposed in 2018 and reinforced in July
2020 in response to the COVID-19 crisis.
It is now boosted by the Next Generation
EU fund, reaching a record high EUR1.8tn.66
It is designed to support the recovery
while investing in a green, digital, andresilient Europe.
Both the Multiannual Financial Frameworkand the Next Generation EU fund provide an
opportunity to decouple economic prosperity
from environmental degradation by applying

the Do No Significant Harm (DNSH)
and Minimum Safeguards required by
the EU Taxonomy to all investments,
i.e. not just those specifically linked toclimate spending.67
Others from around the world
A somewhat different
scenario is unfoldingin the USA, where theFederal Reserve is set tohave the world’s largest
balance sheet at USD912tn after emergency
measures (greater than that of Blackrock,currently the largest investor globally). The
Fed announced measures to relieve strain
in the trading of US Treasuries, agency
mortgage-backed securities and commercial
paper, as well as municipal and corporate
bonds – but lacking fossil fuel screens, such
emergency measures are not only failing tograsp the opportunity to build back better,but also reinforcing associated systemic risks
at the heart of the system.
The UK’s economic
recovery plan includes
a GBP3bn green
investment package
which aims to support
around 140,000
green jobs, upgradebuildings and reduce GHG emissions by
65m kg CO2e.68,69 Efforts are being madeto incorporate climate mitigation into therecovery. For example, a GBP2bn Green
Homes Grant scheme will allow homeowners
and landlords to apply for vouchers to pay
for green housing improvements such as loft,
wall and floor insulation, and low-carbon
heating installation that could save somehouseholds hundreds of pounds a year onenergy bills, while creating thousands ofjobs. The package also includes a GBP900m
Getting Building Fund for projects suchas town centre regeneration and green
infrastructure provision.70
Canada has set up
a Large Employer
Emergency Financing
Facility (LEEFF) to
provide short-term
liquidity assistance inthe form of interestbearing term loans to large Canadian
employers affected by COVID-19. The
aim is to provide bridge financing to large
companies to keep their operations going
and avoid bankruptcies of otherwise viablefirms.71,72 However, the funding is contingent
on several conditions. In particular, recipientsare required to publish annual climaterelated disclosure reports consistent with

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

the Task Force on Climate-related Financial
Disclosures (TCFD), including how their
future operations will support environmental
sustainability and national climate goals.
This could offer a much-needed nudge tothe many oil and gas companies operatingin Canada, which would now be forced toreport if applying for bailout funding.
In South Korea, thegovernment hasannounced it will
invest USD61.9bn by2025 to strengthen
digitalisation, ecofriendly growth andsocial safety nets – this follows a USD1.5bn
sovereign deal from 2019 which contained
a USD500m green and sustainability
tranche.73 Earlier this year, South Korea
became the first Asian nation to make a net
zero GHG emissions pledge – by 2050 –under a newly adopted Green New Deal.74
The pledge is reflected in the latest green
bond by the Export-Import Bank of Korea(KEXIM), a EUR700m deal issued in April.75
The export-focused state development
agency already had a green bond issuanceprogramme, with five issued between 201319 amounting to USD1.4bn, but this is its
biggest yet.
Also in Southeast Asia,
Thailand recently
issued a THB30bn(USD988m) sovereign
sustainable bond as
part of its COVID-19
response measures.
Containing various eligible environmental
and social categories, the 15-year deal is
expected to allocate approximately two
thirds of the proceeds towards COVID-19
support measures, with the rest financing
green projects.76
Norway’s recovery
measures include
a NOK3.6bn green
investment package.77
It is chiefly aimed athydrogen, battery
technology, offshorewind, and low-emission shipping. The
funding will be delivered through a
combination of public and public-private
mechanisms, primarily to medium-to-highTechnology Readiness Level (TRL) activities
supporting industrial competitiveness inemerging solutions. Norway’s hydrogenstrategy recognises the importance ofinnovation to support the decarbonisation ofhard-to-abate, energy-intensive industries.
The high energy density of hydrogen could
allow the electrification of carbon intensive
sectors such as the heavy goods industry.78
20

The EU’s hydrogen strategy similarly
cites the manifold possible applicationsof hydrogen technology so as to facilitatecarbon neutrality by 2050, projecting growthfrom the current less than 2% to 13-14% of
the EU energy mix by 2050.79
The Nigeria Economic
Sustainability Plan(NESP) creates a
stimulus package that
includes installationof Solar Home
Systems (SHS),
targeting five million households andserving approximately 25 million individual
Nigerians who are currently not connectedto the National Grid.80 Solar equipment
manufacturers will be required to set
up production facilities in the country,
supporting the local labour market. President
Muhammadu Buhari has also taken the crashin oil prices as an opportunity to cut at least
USD2bn in annual fuel subsidies. 81
A similar policy has
been adopted in India,
where the government
has increased petroland diesel prices by
Rs 3 (USD0.04) per
litre each to garnerabout Rs 39,000 crore (USD5.2bn) in
additional government revenue. According
to the Hindustan Times, the revenue
generated from these duties will be used
for infrastructure and other developmental

items of expenditure.82 With coronavirus
causing estimates for reaching ‘peak oil’
to be revised ever closer, such policies arelikely to be further embraced, to the extent
that oil consumption may not surpass 2019
levels again.83,84 The European Commission
is considering similar policies, for example
the long called for tax on kerosene alongsidesustainable fuel quotas, aimed at reducing
the climatic impact of aviation.85
To avoid unproductive propping up ofincumbent heavy-emitting companies,
governments should coordinate efforts topromote a green recovery in competitiveand hard-to-abate sectors – in particularcommercial aviation. This would enable
more effective resistance against pressuresto unconditionally address job security
and other economic impacts without
tying support measures to satisfactory
performance on environmental (andsocial) metrics. According to Transport &Environment, only Austrian Airlines and Air
France have agreed to some type of climate
conditions under their bailout packages.86

We are in this together
Ultimately, cooperation and alignment on
recovery packages, with a holistic mindset,
will be critical. More efforts such as Global
Citizen’s mobilisation of USD6.9bn (USD1.5
bn in cash grants and USD5.4bn of loans andguarantees), involving pledges by numerous
governments from around the world, will most
likely be needed to get the world on track

to meet the SDGs.87 The EBRD coronavirus
Solidarity Package, which will provide
EUR21bn covering both emergency liquidity
and long-term resilience and infrastructure
investment to developing economies, isanother effort aimed at preventing COVID-19
from exacerbating global inequalities,
addressing multiple SDGs.88
In a world that is increasingly turning tocapital markets to finance climate projects
and more recently the recovery, green bonds
can be an important tool to achieve greater
economic and financial resilience and reduce
disruptions from both chronic climaticchange impacts and acute climatic shocks
like the COVID-19 outbreak. And they can, ofcourse, be useful both to public and private
sector issuers.
Likewise, other labelled instruments –social and sustainability bonds and loans,
performance-linked instruments, andpotentially others – can also play a role. Earlier
this year, ICMA released Sustainability-Linked
Loan (SLL) Principles and updated its Social
Bond Principles (SBP), expanding the eligiblesocial bond categories and the definition oftarget populations to a global population, inline with recent guidance for social bonds
addressing the COVID-19 crisis.89,90,91 The
trade association also revised its impact
reporting guidelines to include biodiversity
and an impact reporting framework forsocial bonds, as well as publishing guidanceon mapping green, social and sustainability
bonds to the SDGs.92

GREEN

SUSTAINABILITYPANDEMIC

SOCIAL

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative21

Framework, harmonisation, and common definitions
Setting standards: being‘green enough’Green bond standards
introduce financefriendly metrics,
performancemeasurement,
transparency andvalidation that enable
investors to make decisions efficiently
and allocate capital where it is needed(and where it will create returns), while
holding issuers accountable for their market
practices. Underpinning these standards
is a need to align definitions for what is
considered ‘green’. Taxonomies provide acommon language that informs issuers,
investors, and policymakers about whether
an economic asset or activity is aligned with
the Paris Agreement, preventing proposals
from lacking ambition and greenwashing.
2020 has been a breakthrough year forthe adoption of taxonomies as meansof determining whether an investment
contributes to climate change mitigationor other environmental objectives. The
EU and China, which collectively accountfor approximately 35% of global GHG
emissions,93 respectively published the EU
Taxonomy and PBoC Green Bond Endorsed
Projects Catalogue (latter originally launchedin 2015 and updated and released for
consultation this year).94,95
Generally speaking, both the EU Taxonomy
and the PBoC Catalogue outline theenvironmental performance criteriathat economic activities must meet tobe considered as making a substantial
contribution to climate change mitigationor other environmental objectives.
Complementing these, the World Bank
recently produced guidance on how
to develop green taxonomies in EM –as of yet, it is not closely tied to climate
science and therefore raises questions
on the stringency of resulting local/
regional taxonomies and harmonisation
with other taxonomies.96
Such documents can serve as the blueprints
for the net-zero GHG emissions economy wemust transition rapidly towards. It now falls
on national governments and sub-national
actors to align their fiscal expenditures andpriorities to these taxonomies.

Enabling the green transition
Encouraging GHGintensive industry
sectors – such as
materials, chemicals,
shipping andaviation – to shift to‘greener’ businessmodels is key to the global effort ofkeeping the increase in the global averagetemperature to well below 2°C. Yet
there has been limited engagement ofthese sectors in the green bond market
to date. Global green finance markets
have scrambled to explore the potential
to facilitate -green transitions for highly
polluting sectors through bond issuance.
Transition bonds, an emerging newlabelled debt instrument, are targeted atemission-intensive industries. There isno single definition on what a transitionbond can finance – raising some concerns
around greenwashing – but there is now
an emerging consensus that any labelledtransition bond should be ambitious, notlight green.
This means making deep emissions
cuts to existing activities in the shortterm while transitioning whole entities
to a pathway consistent with the Paris
Agreement. Transition bonds can allow
companies in emissions intensive
industries to raise capital with the goalof decarbonising their value chains at the
speed required by the Paris Agreement.
Examples include investment in greenhydrogen, early decommissioning offossil fuel power plants and retrofits ofairline fleets to operate with maximum
biofuel or synfuel content. The shareof issuance and investment made in
emerging economies like China, India
and Indonesia is crucial.
Climate Bonds Initiative is working
with regulators, investors and otherkey market stakeholders to activatetransition finance for segments thathave largely been absent but offer hugeemission reduction potential. To this end,
we have just released a ground-breaking
Financing Credible Transitions white
paper which clearly defines transition asa concept and presents a framework for
identifying credible transitions alignedwith the Paris Agreement.107

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

The EU Taxonomy can guiderecovery efforts
The recommendations of the EU
Technical Expert
Group (TEG)
on Sustainable
Finance provide
an updated set ofsustainability criteria for 70 economic
activities under the EU Taxonomy.
This lays the groundwork for identifying
activities that provide a substantial
contribution to climate change mitigation
and/or adaptation, and sets out minimum‘Do No Significant Harm’ (DNSH) thresholds
for each of the EU’s six environmental
objectives: mitigation, adaptation, waterand marine resources, circular economy,
pollution prevention and control, andbiodiversity and ecosystems.
Under the EU Taxonomy regulation, whichcomes into effect in 2021, investors andcompanies must disclose the environmental
performance of the activities they invest
in. As such, and albeit from a binary ‘in orout’ standpoint, the EU Taxonomy may be
a powerful tool to help investors assess theimpacts of their holdings based on taxonomy
alignment, and for policymakers to assess
potential expenditures, asset purchases andother investments with a similar rationale.
In effect, the EU Taxonomy can be seen as aprocurement plan for a green economy.
This should support transparency andcomparability in the financial sector aswell as expand the offering of sustainable,
ESG and impact investment options, andultimately help to direct more financial flows
to such assets and projects.
ESG factors are increasingly integrated
in investment processes, and cruciallyamong institutional investors. For instance,
members of the Net-Zero Asset Owner
Alliance – which represent some of theworld’s largest investors and a combined
USD5tn in assets – recently pledged to
implement GHG emission reductions in theirportfolios of between 16% and 29% over the
next five years as well as carbon neutrality
by 2050, in line with the IPCC’s target oflimiting global warming to 1.5°C.97
But there is still a need to do much more,
especially within some lagging groups. A
recent AIMA and KPMG study, for example,
showed that 85% of hedge funds havemade little or no effort to incorporate ESG
into their strategies.98 Hedge funds may
22represent a relatively small share of global
AUM, but only a consistent and coherent
approach will enable the true evolution – orrevolution – of finance.
Technical aspects
The first company reports and investor
disclosures using the EU Taxonomy are dueat the start of 2022. In the meantime, the EU
can be expected to maintain and expand the
EU Taxonomy to include further economic
activities via the International Platform on
Sustainable Finance (IPSF), covered in moredetail on page 24.
While EU Taxonomy alignment is primarily
intended to be assessed based on company
revenues, it could also use turnover or
expenditures allocated to each taxonomyrelated activity.99 In addition, the approach
could be extended to communicate
contributions to SDGs, for instance among
impact investor portfolios. This would dependon the availability and reliability of data.100
In this context, FTSE Russell released areport in September summarising thedevelopment of and approaches taken by the
EU Taxonomy and the FTSE Russell Green
Revenues Classification System (GRCS),
examining the overlaps and differences
between the two. It also provides a useful
overview of how the GRCS dataset can
provide a stepping stone for investors tocomply with the requirements of the EU
Taxonomy regulation, and how the alignmentof business revenues can be determined.101
The EU Taxonomy report is complemented
by the Usability Guide for the EU Green
Bond Standard (GBS), which aims toensure that investments contribute to the
EU environmental objectives by following
the criteria outlined in the Taxonomy. The
European Commission closed a three-monthpublic consultation period on the GBS in
October 2020 and is expected to decide how
to take it forward in Q4 2020.102

China strengthens Green Bonds
Endorsed Projects Catalogue
The People’s Bankof China (PBoC),
the China Securities& Regulatory
Commission (CSRC),
and the National
Development & Reform
Commission (NDRC), have jointly updated
their Green Bonds Endorsed Projects
Catalogue (PBOC Catalogue), which governs
China’s green bond market. It was released
for public consultation in July 2020 and an
unofficial English translation can be found on
our website.103

The PBoC first issued green bond regulationsin December 2015,104 followed by the NDRC
in January 2016,105 and CSRC Guidelines
in March 2017.106 However, each regulator
adopted separate approaches, meaning thatfor example state-owned enterprises weregoverned by a slightly different taxonomy tobanks and other corporates.
While addressing climate change has beena feature of China’s national policy forthe past ten years, the domestic focus ofgreen finance was previously on cleaning
up pollution, starting with air pollution.
The original PBoC catalogue includes
investments in ‘ultra-supercritical’ coalfired power. Ultra-supercritical coal powerdramatically reduces particle pollution (i.e.
air pollution) in places like Beijing, however,it only reduces CO2 emissions by around
25% compared to older coal-fired power
plants, whilst global climate goals depend onmuch steeper emission reductions
The updated 2020 PBoC Catalogue not
only excludes coal, but there is no mentionof production or utilisation of natural gas
either. It also adds hydrogen, sustainableagriculture, green consumer finance, anda host of other useful sectors like green
services and manufacturing.
The proposed change, while not yet approved,is arguably one of the most important
recent developments from China, marking amilestone for global harmonisation efforts on
green guidelines and criteria. It also makes
an important contribution by harmonisingguidelines domestically. Previously, and as
noted, different issuer types used different
green definitions depending on the applicableregulator (e.g. PBoC for financial institutions,
NDRC and CSRC for corporates). If the
proposed changes are approved, any bondcan be recognised as green if it meets thecriteria of 2020 PBoC Catalogue, no matter
which market it is issued in or what type ofbond it is.

initially on the first of its six environmental
objectives – climate change mitigation –while the Chinese Catalogue has a broader
focus across three objectives – resource
efficiency/conservation, environmental
improvement, and climate change.
The PBoC’s Catalogue also focuses on
projects with substantial environmental
benefits and in line with industrial policy
guidance and tries to solve a series ofchallenges such as serious domestic
environmental pollution, increased resource
constraints, and ecological degradation. The
inclusion of clean coal projects to reduce local
air pollutions has already been mentioned as
one discrepancy that may disappear.
A more harmonised taxonomy
internationally would help ensure robust
definitions of ‘green’ that adequately
address environmental challenges while also
supporting a country’s engagement in global
green initiatives.
Differences in definitions of ‘green’ reflect
the distinct challenges faced by countries
and regions, but there are many efforts toimprove coordination, in particular the IPSF
(see next page). Furthermore, taxonomy
alignment is an opportunity to ensure thatboth the EU and China pursue and promotemutually sustainable growth and an inclusive
green recovery. Both sides have madegreat strides over the last few years andhave shown a commitment to maintaining
environmental objectives. A comparison
between the EU and China taxonomies is due
for publication in 2021.
China and the EU are not alone in their efforts
to develop taxonomies that can ultimately
guide public and private sector procurement
strategies. Countries around the world
are beginning to look towards taxonomy
development as a vital tool for strategic
decisions on green and sustainable finance.

Cooperation on taxonomies
If green finance is tofulfil its role in helping
to meet the goals of
the Paris Agreement
then it is importantthat all global, regionaland national green
guidelines are also consistent with the Paris
Agreement – i.e. that they prioritise assets
and projects that substantially contribute toclimate change mitigation and adaptation.
The EU and China have the most advanced
taxonomies, each with slightly different
focus areas and resultant green definitions.
The EU Taxonomy, for example, has focused

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

23

Wider sustainable finance developments in major regions
We cannot fulfil the SDGs with green andsustainable bonds alone, but used correctly,
such investments provide competitive
financing for large scale investments fromthe public and private sectors. Further,while investors may be eager to buy suchproducts, there is an equally important needfor governments to stimulate such climatealigned investing. The following sections
highlight key developments in Europe, China
and the USA, providing some context on
where the world’s largest economies areheading on the sustainable finance agenda.

EuropeThe European Green Deal
On 14 January 2020, theEuropean Commission
presented the European
Green Deal Investment
Plan, set to mobilise atleast EUR1tn of sustainable investments overthe next decade.108 The European Green Deal
provides a framework to facilitate public andprivate investments needed for the transition
to a climate-neutral, green and competitive
economy by boosting the efficient use ofresources and moving to a clean, circular
economy, while restoring biodiversity
and cutting pollution.109 It outlines theinvestments needed and financing tools
available, including how to ensure a just andinclusive transition.110
In order to achieve the EU’s goal of carbonneutrality by 2050, the proposed European
Climate Law aims to turn this ambitious
political commitment into a legal obligation
and a trigger for investment at scale.111
Reaching this target will require action
among all sectors of the European economy,
including investment in environmentallyInternational Platform on
Sustainable Finance
The EU has also launched the International
Platform on Sustainable Finance (IPSF)
to coordinate market developments
globally and provide a multilateral
forum for facilitating exchange. It will
enable a comparison and coordination ofefforts on initiatives and approaches toenvironmentally sustainable finance while
respecting national and regional contexts.
The platform is an advisory bodycomposed of experts from the private andpublic sector. This group, which is planned
to succeed the TEG, will advise thefriendly technologies, innovation, cleaner
and healthier transport solutions,decarbonisation of the energy sector, energy
efficiency in buildings, and strengthening
international partnerships to improve global
environmental standards.
Just Transition Mechanism
As part of its Green Deal, the EU has createda Just Transition Mechanism throughwhich it will provide financial support andtechnical assistance to help the people,
businesses and regions most affected by
the move towards the green economy.112
This will mobilise at least EUR100bn overthe 2021-27 period, seeking to overcome
the economic and social costs of theclimate transition in the most vulnerable
carbon-intensive regions and sectors. The
mechanism employs a Just Transition Fund,the InvestEU Just Transition Scheme, anda European Investment Bank (EIB) public
sector loan facility. It is imperative that the
Just Transition Mechanism is aligned with
the EU Taxonomy.
Renewed Sustainable Finance Strategy
With the recovery from the economic
consequences of the COVID-19 crisis
requiring greater investment across all
sectors, financing frameworks – both public
and private – must support this overall policy
direction. To further meet this need, the EUlaunched a Renewed Sustainable Finance
Strategy to provide policy tools to ensurethat financial systems genuinely support
businesses with a sustainable recovery.
The renewed strategy will contribute to theobjectives of the Green Deal Investment
Plan, in particular by creating an enabling
framework for private investors and the public
sector to facilitate sustainable investments.113

European Commission on the technicalscreening criteria for the EU Taxonomy
and sustainable finance more broadly. In
addition, the IPSF will serve to monitor
and report on capital flows towards
sustainable investments.
IPSF Members: Argentina, Canada,
Chile, China, EU, India, Indonesia,
Kenya, Morocco, New Zealand, Norway,
Singapore, Switzerland, Senegal.
Combined, these represent:• 50% of global GHG emissions• 45% of global GDP• 50% of world population

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

EIB Energy Lending Policy
In November 2019, the European Investment
Bank (EIB) launched its new Energy Lending
Policy which will cease all fossil fuel energy
financing would cease after the end of 2021,
with all financing activities aligned with theParis Agreement by the end of 2020. Thisis aligned with the Just Transition Fund,which is planned to finance up to 75% ofinvestments in new energy projects in the 10
most vulnerable EU countries.114

China
National Policy on
Green Finance
China has developed acomprehensive frameworkfor green finance, which is
expected to support thecountry in reaching its recently announced targetof carbon neutrality by 2060.115 The government’s
regulatory administration and stock exchange
have played a crucial role in promoting thedevelopment of green finance in the country.
The main pillars of this framework include:
Green Credit Guidelines for the banking
system, which were formulated by the China
Banking Regulatory Commission (CBRC) andinclude a statistical system for measuring andevaluating green credits.116,117 The guidelines set
out how banks should address environmental
issues at the board/management level
and how to integrate environmental
considerations into lending processes.
Guidelines for Establishing the Green
Financial System, released in 2016, which
consists a series of policy measures tosupport and incentivize green investment.
These incentivise include, among others,
re-lending operations by the People’s Bankof China, specialised green guarantee
programs, interest subsides for green loansupported projects, and the launch of anational-level green development fund.118,119
These two guidelines outline the importantrole of the securities market in financing green
investment, require a unification of domestic
green bond standards, support qualified
green companies to raise funds via IPOs andsecondary placements, assist the developmentof green bond indices, green equity indicesand related products, and require a gradualestablishment of a mandatory environmental
information disclosure system for listedcompanies and bond issuers. This followed theinclusion of a ‘green financial system’ in theecological civilisation construction strategy ofChina’s 13th Five-Year Plan.120,121

24

A Revised Code of Corporate Governancefor Listed Companies in China wasreleased by the China Securities Regulatory
Commission (CSRC). It requires listedcompanies to take actions based on green
development, to integrate ecological andenvironmental protection into development
strategies and corporate governanceprocesses, and to disclose related
information.122
The Green Investment Guidelines werereleased in 2018 by the China Securities
Investment Fund Industry Association to
encourage fund managers to pay attention
to environmental sustainability, strengthen
their awareness of environmental risks, andclarify the definition and implementation
methods of green investments. They
aim to promote green investment in thefund industry, improve the environmental
performance of investment activities, andmore broadly contribute to green andsustainable economic growth.123
The Green Industry Guidance Catalogue(2019 Edition) clarified green definitions
through a taxonomy of green industries
and projects.124 This forms the basis for
introducing policies and initiatives in finance,
pricing, taxation and others, providing astrong reference for green investments.
Local Policy on Green FinanceOne feature that is unique to China is theambition with which local governments
at all levels are actively formulating theirown plans to develop green finance in theirrespective regions. As of 2019, more than
500 green finance policies were issued byprovincial and sub-provincial governments
nationwide, including more than 300
specific administrative measures to promote
the development of green finance withinjurisdictions. Green bonds have been a major
focus of these local plans. For example:• Beijing issued a Memorandum in 2015
and began to promote the issuanceof green bonds overseas.125 In 2017,
Implementation Measures were released
to advance Beijing’s goal of developing amarket for green bonds and green ABS(securitised) products.126 These endorse
green bond standards, support financial
institutions in issuing green financial
instruments, and advocate third-party
assessment. The measures also
uphold green finance in government
procurement, direct investments, andpublic-private partnerships. For example,
in 2019, the Zhongguancun Science
Park released related policies to promote
green bonds, and single issuers canapply for subsidies worth up to RMB1m(USD146k) annually.127• Jiangsu Province formulated a trial policy
whereby 30% of the effective annual interest
paid by non-financial corporates issuing green
bonds is reimbursed for two years.128 For asingle issuer, the maximum reimbursement
is RMB6m (USD877k) per year.
• In 2019, Lanzhou New District introduced
the integrated plan for the construction of
a Green Finance Reform and Innovation
Pilot Zone, making it the ninth green
finance pilot area in China.129 The policy
proposes the use of green bonds tofinance investment in green industries,
particularly for underdeveloped westernregions of the country.
• Another development plan released in2019 defines the goal of building a green
finance centre in the Guangdong-Hong
Kong-Macao Greater Bay Area. Thistakes advantage of Guangzhou as agreen finance pilot area, supporting thedevelopment of green finance in districts
and cities in the area while working
with Hong Kong and Macao to build aninternational financial hub.
• The Integrated Plan for the Yangtze River
Delta region puts forward the strategic goalof green innovation and development.130
Through the development of green
finance capabilities, financial institutions
and enterprises are encouraged to issue
green instruments – such as green bonds– and to explore the establishment of amarket-oriented mechanism to attractsocial capital towards ecological andenvironmental protection.

USA
Climate-Related
Disclosure Requirements
CFTC Climate-RelatedMarket Risk SubCommittee
In July 2019, the Commodity
Futures Trading Commission (CFTC) announced
the creation of the Climate-Related Market Risk
Subcommittee, a group tasked with examining
the risks that climate change poses to thefinancial system and identifying what future
actions policymakers and market participants
must take to mitigate these risks.131
While the threat to financial stability posed byclimate risk is widely accepted, US regulators
have been slow to move on concretemeasures to embed climate risk at the coreof financial decision-making and market
activity. This positions the US as a potential‘rule-taker’ while regulators overseeing therest of the world’s largest financial markets
move swiftly on climate-related disclosure
requirements and stress testing.

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

Nonetheless, the subcommittee has justpublished a report entitled Managing
Climate Risk in the U.S. Financial
System, which addresses several topics,
including challenges in the evaluation andmanagement of climate-related risks to thefinancial sector and markets, how market
participants can improve integration ofclimate stress tests, and recommendations
for regulators and policymakers to
improve climate-related disclosure andrisk management.132 These findings will
be reported to the Market Risk Advisory
Committee within the CFTC for future action,
but for now US financial markets remain insomewhat of a ‘holding pattern’.
Ongoing SEC Debates over Climate-Related
Disclosure Guidelines
While tangible steps to mandate and clarify
climate-related disclosure requirements– in line with TCFD – are taken elsewhere,
significant debate remains in the US
about the role of regulators in doing so. In
January 2020, the Securities and Exchange
Commission (SEC) put forth a series ofamendments to current disclosure rules but
maintained its long-standing position thatclimate change disclosure should be rooted
in materiality. Questions are still floating
among the SEC on whether climate-related
disclosures truly meet this standard.133
ESG Investing
SEC Movements to Clarify ESG Fund Labelling
There is growing momentum from the SEC
on setting standards for ESG funds, withthe aim of eliminating greenwashing andpushing asset managers towards an industry
standard on what it takes to label a fund or
product as ‘green’.134
As sustainable investment funds continue
to see record inflows in the US, the SEC
has become increasingly focused ontransparency of information in the market sothat investors – particularly retail consumers– are able to make well-informed investment
decisions and accurately compare options.
The regulator is specifically looking todetermine whether such funds are complying
with the Names Rule 2 under the Investment
Company Act of 1940, which was designed
to help ensure that investors are not misled
or deceived by a fund’s name. At the
moment, there is the possibility that asset
managers use ‘ESG’ or ‘sustainable’ labels asa signal to attract flows into their investment
vehicles (given the increase in demand
for such products), but then fail to meet
minimum standards for ESG considerations
when making investment decisions withinfunds. As of yet, however, the SEC has
still not made any formal movements toimplement the recommendation. 135
25

Department of Labor Proposed Rule on ESG
Investing for ERISA Plan Fiduciaries
In June 2020, the US Department of Labor(DOL) proposed a rule to update and clarify
the DOL’s investment duties regulation, in amove intended to provide clearer regulatory
guidelines for Employee Retirement
Income Security Act of 1974 (ERISA) plan
fiduciaries given the increasing demand forprioritisation of ESG factors in investment
decision-making.136 ERISA is a federal lawthat sets minimum standards for mostprivate voluntarily established retirement
and health plans in private industry.137
The proposed rule, which states that ERISA
plan fiduciaries cannot sacrifice returns
or take on additional risk by incorporating
ESG factors into investment decisions,has many fearing that environmental,social and governance dimensions will be
deprioritised. Investors are increasingly
focused on placing ESG factors at the core ofinvestment mandates, and there is growing
evidence that these are material financial
determinants that must be at the coreof prudent investment decision-making.
Further, major ESG funds have outperformed

the S&P 500 during COVID-19, illustrating
their propensity to provide stable returns
even in volatile environments.138
It is indisputable that environmental factors
like climate risk will have a detrimental
effect on asset prices and the stability offinancial markets if they are not addressed,
so it stands to reason that ERISA plan
fiduciaries should consider these factors –just as they would any other material ones
– in investment decisions. Moreover, theproposed rule is misaligned with the growing
systemic integration of climate risk into risk
management frameworks, as an increasing
number of institutional investors recognise
the potential for climatic impacts to erode
returns and add risk to portfolios.
As the comment period comes to a close,
whether or not the proposed rule will move
forward remains on standby.
Ceres Accelerator for Sustainable
Capital Markets
Launched in October 2019, the Ceres
Accelerator for Sustainable Capital Markets
targets the policies and practices that govern
capital markets in order to address the urgencyof climate change more effectively. The Ceres
Accelerator is designed to be a catalyst foraction on systemic financial risks associatedwith the climate crisis and other sustainability
threats, helping to drive large scale change byachieving Paris Aligned portfolios, regulatingclimate as a financial risk, financing a netzero economy and through board governancefor a sustainable future.

Rocky Mountain Institute’s Center for
Climate-Aligned FinanceLaunched in July 2020, Rocky Mountain
Institute’s Center for Climate-Aligned
Finance was established as an ‘engine
room’ to help financial institutions
partner with their clients, industry
leaders, and key buyers, to develop
practical and scalable solutions to thebarriers to climate alignment. Climatealignment is a powerful theory that
could provide a definitive approach forthe financial sector to drive long-term,
multi-sector decarbonisation.

Taxonomies, Sovereign GBs and NGFS globally
SwedenGermany

CanadaNetherlands
BelgiumUK
IrelandFranceSpain
Luxembourg

MexicoPolandHungary
Lithuania

RussiaEU
Slovenia
Austria
Egypt
UAEWest African States
Colombia

Nigeria

Mongolia
Kazakhstan

Seychelles

China

South Korea
Hong Kong

India

Thailand
Malaysia

Fiji

Indonesia
ChileSouth Africa

Australia

New Zealand

Network for Greening the Financial System (NGFS) membership

Sovereign Green / Sustainability Bond issued

Network for Greening the Financial System (NGFS) membership
through economic communities

Sovereign Green Bond planned
Taxonomy of sustainable activities
developed / planned

NB: Ecuador and Guatemala have issued Sovereign Social bonds.

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

26

Central banks playing a bigger role
as of the end of 2019.141 Sustainability-linked
bonds were recently announced to be eligible
as collateral and for its asset purchaseprogrammes from 2021.142

Over the last couple of years, many central
banks have maintained and extended efforts
to analyse and manage climate risk.139
However, as with other public institutions,
COVID-19 has prompted monetary
authorities from around the world to focus
their efforts on stimulating the economy.
Targeting short-term economic boosts, thesehave often been tangential to the green
agenda, focusing instead on health, socialand economic priorities.
For example, several central banks haverecommenced quantitative easing (QE)
programmes by purchasing corporate andsovereign bonds, reducing repurchaseagreement (REPO) interest rates, or providing
banks with credit lines to provide short-term
liquidity and support distressed loans. Many
commentators have called for a greening ofsuch stimulus packages, but asset buybacks
to date have largely involved buying vanillaand green instruments indiscriminately.
Looking ahead, central banks and otherfinancial supervisors are likely to strengthen
their focus on long-term risks withexponential characteristics, leading to amore granular assessment of climate andother environmental risks.140 Complementing
this assessment, it is also crucial that they
incorporate it into asset purchases andsupport mechanisms.

European Central Bank (ECB)
The ECB is alreadymoving in this direction.
Under the Corporate
Sector Purchase
Programme (CSPP)
of its Asset Purchase
Programme (APP),
which is part of its QE activities, the ECB
had purchased around 20% of the EUR31bn
eligible universe of green, investment grade,
EUR-denominated corporate bonds – and
24% of eligible public sector green bonds –There has been intense debate about
whether the ECB’s EUR750bn Pandemic
Emergency Purchase Programme (PEPP)
should be targeted towards green assets,
for instance by purchasing more bonds
issued by the EIB, a large part of which fundgreen infrastructure projects.143 ECB’s (selfimposed) rules restrict its purchases to thesecondary market and require it to operate
in a market neutral way, open to any issuer
that meets the criteria for credit quality andliquidity without favour.
Nonetheless, the ECB’s President, Christine
Lagarde, who has been spearheading a
global drive to make the environment anessential part of monetary policymaking,recently declared climate risk to be a
mission-critical goal for the central bank. She
promises to examine changes to all of thecentral bank’s operations in the response to
climate change.144
Further, Isabel Schnabel, one of the ECB’s
Executive Board Members, has announced
that, through its supervisory arm, the ECB
could require banks to provide climate risk
assessments, which could affect their accessto central bank funding if the assessment has
a direct implication on collateral valuations.145
She also argued that the ECB should push
the EU to add a green element to its longdelayed project of setting up a capital
markets union, as a focus on green financecould give the bloc a competitive advantage.

Network for Greening the
Financial System (NGFS)
Another promisingavenue is the global
NGFS. Formed in 2017,
this ‘coalition of thewilling’ had expanded
to 69 members and13 observers by July
2020.146 The network undertakes research andshares results amongst its membership. It iscurrently organised into three work streams:
1. Mapping current supervisory practices
2. Developing climate risk financial scenarios
3. Identifying policies to scale up green finance
The NGFS published four major reports
between May and June 2020 to assist
banks and central banks from both within
and outside the network in creating greener
financial systems:

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative• Climate scenarios for central banks
and supervisors – the report andaccompanying datasets, prepared byclimate researchers, present three
representative scenarios on orderly
and disorderly expansions of climate
mitigation policy, one with significant
physical impacts.147• Guide to climate scenario analysis – thisreport helps supervisors make use ofdifferent climate scenarios, such as thosein the above report, to assess financial
risks to banks and insurers.148• Guide for supervisors – this sets out therange of actions that NGFS members canand are currently undertaking to inculcate
climate risk awareness within their
institutions and within the entities theysupervise.149• Risk differential between green,
non-green and brown financial assets –this status report has results from avoluntary survey of banks and insurance
firms on differential credit risks between
different assets.150

Bank for International
Settlements (BIS)
The BIS – the ‘central
bank of central
banks’ – introduced
its Green Bond Fundin September 2019,an open-ended green
bond fund to enable
central banks to manage their reserves while
investing in climate-friendly products geared
to their needs.151 This novel instrument
purchases investment grade (A- and above)
USD-denominated bonds to provide central
banks with a highly liquid and safe green
asset, thus allowing green bonds thatincorporate climate to be used in a core partof banking regulation.
BIS also published an interesting book,
Green Swans: Central banking and financial
stability in the age of climate change,
about the inherent unpredictability ofclimate risks.152,153 Among other findings,
it confirmed that central banks are
increasingly looking at ‘green’ financial
instruments as an additional tool for their
FX reserve management. For instance, apartfrom the ECB’s hefty green asset purchases,
Sweden’s Riksbank recently decided
to reject issuers with a ‘large climate
footprint’, for example selling bonds issued
by a Canadian province and two Australianstates (see next page).154

27

Other central banks
Other central banks from around the world
have introduced various policies in line withrecommendations from Climate Bonds
Initiative’s Greening the Financial System:
Tilting the Playing Field.155
Disclosure and risk
The Bank of England(BoE) and Banque deFrance both announced
the release of climate
risk scenarios forsupervised banks
and insurers to use in
their stress tests. The
scenarios provide acommon framework
to allow comparison
between institutions.
The UK Prudential
Risk Authority sets out
three scenarios for banks and insurers to
use in the 2021 Biennial Exploratory Scenario,
and Banque de France is doing a similar
exercise.156,157
Further, the BoE published climate-related
financial disclosure in June 2020.158 This
covers internal governance, external roles(climate risk forum and NGFS), regulatorychanges (see below), and staff working
papers on internal research, such as therisk differential between housing lenders
following extreme events. The BoE holds
GBP530bn of assets – chiefly throughits Asset Purchase Facility – of which
GBP500bn are gilts and the remainder are
GBP-denominated corporate bonds. The
bank claims the carbon footprint of theseassets is lower than the average for otherG7 countries by dint of the UK’s economy
being more decarbonised. It has no policy toactively target green assets.
The UAE’s financial
authorities, including
the Central Bank of
the UAE and the Abu
Dhabi Global Market,
published the country’s
Guiding Principles on
Sustainable Finance, quoting international
best practice and providing Abu Dhabi’s
financial sector with a voluntary guideline toset out the disclosure standards it seeks.159
The Netherlands’
DNB has applied
some of the ideas
from the TCFD to thetheme of biodiversity
loss. A recent joint
study with the PBL
Netherlands Environmental Assessment

Agency, entitled Indebted to nature, explores
the biodiversity risks to the Dutch financial
sector, particularly those associated withdamage to critical ecosystem services suchas pollination and nutrient regulation.160 The
new study builds on the Values at risk? report,
published last year by DNB, in which therisks of biodiversity loss were investigated in
more qualitative terms.161
Prudential regulation and collateralframework
Central banks can have a major impact onbank lending by adjusting the rules governingthe ‘haircut’ they impose on assets offered
as collateral, or how they weigh assets whenassessing whether a bank is adequately
capitalised. So far, central banks have been
hesitant about departing from the principleof ‘market neutrality’ – the NGFS’s mostrecent publication on brown vs. green risk
differentials reiterates this hesitance – butthere are signs of change, especially whengreen assets can be linked to lower default
risks.
In China, the People’s
Bank of China (PBoC)
has been implementing
a Green Credit
Performance Evaluation
Programme since 2018
for the country’s majorbanks and has included the outcome to thecentral bank’s macroprudential assessment(MPA) for the banks. The evaluation isconsisted of both qualitative (20%) andquantitative (80%) components with fivequantitative indicators: the proportion ofgreen loan balance, the proportion of green
loan balance share, the ratio of green loan
increment, the year-on-year growth of green
loan balance, and the non-performing ratioof the green loans.162
In 2018, a recommendation was made to
the PBoC’s monetary policy committee
to lower the risk differentials of green
assets. The PBoC is also actively involvedin the discussion and analysis of potential
underlying risk differentials of green andbrown assets at the NGFS.
One central bank toslightly break ranks
is the Central Bankof Hungary (MNB),
which last year
announced portfolios
of mortgages onenergy efficient homes will be moreleniently treated in its capital adequacy
formulas. Mortgage lenders are being
asked to share this benefit with borrowers
by reducing interest rates on loans for

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

energy efficient homes by 0.3%. The MNB
has justified this policy by citing evidence
showing that green mortgages have lower
risks of default than vanilla ones. Similar
evidence of lower default risks has beenfound in other EU housing markets.163
Own asset purchase
The Monetary
Authority ofSingapore (MAS) has
established a USD2bn
fund to encourage
private sector fundmanagers to create
products driving regional environmental
improvements and/or managing
environmental risks. The first purchaseby the MAS under this initiative was a
USD100m purchase of the BIS Green Bond
Fund previously mentioned (see previouspage).164 This reflects the authority’s strategy
of developing green finance markets andcomplements existing grant schemes tosubsidise the costs of verifying green bonds
and loans.
Sweden’s Riksbank has decided to divest
bonds issued by sub-national governmentswith a large carbon footprint in Australia(Queensland and Western Australia) andCanada (Alberta).165 Announced in early
2019, the divestment continued over
the year, including the sale of stakes inAlberta’s tar sands last autumn. Norway’s
Norges Bank Investment Manager, which
manages the country’s USD1.1tn sovereign
wealth fund (Government Pension Fundof Norway), also announced it plans todivest from companies dedicated to oiland gas exploration in 2019 – however,the fund manager and Norway’s Finance
Ministry made it clear that this is aimed
at protecting the country’s overall
wealth from oil-price risks, rather thanfor climate reasons, with the scope ofdivestment having shrunk following theannouncement.166

Other regulators also
increasingly involved
Financial Centres for Sustainability
The International Network of Financial
Centres for Sustainability (FC4S) is agroup of financial centres from around theworld with the objective of accelerating the
expansion of sustainable finance by enabling
financial centres to exchange experience anddrive convergence globally.167 It currently
counts 30 members, including public-private
agencies and market associations, someof which have regulatory and supervisory
functions in local markets.168

28

IOSCO’s Sustainable Finance Network
Complementing the work of the NGFS, theInternational Organization of Securities
Commissions (IOSCO) – a network of
securities regulators from 115 countries– has become more involved in the topic
of green finance. IOSCO established a
Sustainable Finance Network issued reports
in June 2019. The focus of its work to datehas been to uncover the range of work
undertaken by members of the network andto understand respective levels of disclosure,including guidelines and obligations around
ESG reporting.169
In the UK, the Pensions Regulator has issued
a statement clarifying that “climate change is
a risk to long-term sustainability that pension
trustees need to consider when setting andimplementing investment strategies”, in
response to a long-standing and erroneous
perspective held by trustees that their focus
should be short-term returns.170
Sustainable Banking Network
The Sustainable Banking Network (SBN) isa voluntary community of financial sector
regulatory agencies and banking associations
from EM supported by the IFC. The SBN’s
stated aim is to advance sustainable financein line with international good practice,with its 40-member countries represent
USD43tn (85%) of EM total banking assets.
Having released its first Global Progress
Report in 2018, the SBN’s most recent study,
entitled Necessary Ambition: How LowIncome Countries Are Adopting Sustainable
Finance to Address Poverty, Climate

Change, and Other Urgent Challenges,
finds that sustainable finance has emerged
as a pathway for low-income countries tode-risk investments and enable the financial
flows needed to support climate action andsustainable development.171
Other green finance initiatives byregulators
2019 saw institutional change from several
financial regulators, with the establishmentof various subcommittees and commissions
on climate risk.
The French Financial Markets Authority
has created a Climate and Sustainable
Finance Commission to strengthen action
on regulatory and supervisory issues related
to sustainable finance, for example throughchanging practices, increasing transparency,
facilitating capital mobilisation, andincluding sustainability dimensions infinancial discussions.172
Some initiatives by US regulators are
discussed on pages 26-27. An increased
focus on climate risk is also shown by the
Canadian Securities Administrators, whichissued a Staff Notice on Reporting of Climate
Change-related Risks to provide issuerswith guidance on identifying and disclosing
climate risks, in response to increased
investor interest in climate disclosure.173
Similarly, Germany’s Federal Financial
Supervisory Authority, BaFin, publishedgood practice guidelines for dealing withsustainability risks.174 It is aimed at improving
risk management among the diverse set offinancial institutions supervised by the authority.

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

What next?
Central banks need
to work closely withfinance ministries to
set a post-COVID
recovery that integrates
the ‘build back better’
agenda of green
stimulus packages, with targeted purchasesof ‘green-resilient’ assets and preferential
loans by central banks.
Many of the interesting highlights mentioned
above need to become more mainstream.
For instance, DNB’s work on biodiversity isparticularly timely given the needs of theConvention on Biodiversity for conceptualand practical support on mechanisms to
attract private finance for biodiversity andecosystem conservation, as well as a more
systematic appreciation, understanding
and assimilation of the financial risks fromconservation failure.
The UK and France are pioneering climate
stress testing. Now that the NGFS haspublished guidance, more central banks
could start to implement these scenarios andhelp banks and insurance companies manage
such risks, which would be especially usefulin the context of TCFD.
Lastly, many central banks have called forothers to produce a ‘brown’ taxonomy. It
seems to us that central banks, in their role asprudential regulators, are the primary usersof such a taxonomy. If the market does notdevelop something that defines assets of
dubious value and high exposure to climate
risk, central banks and regulators may therefore
need to incorporate such work in their own
research agendas, looking for support fromgovernments and sector experts to ensure
credibility, relevance, and operability.

29

Global stock exchange developments
Stock exchanges from around the world
are also becoming prominent supporters ofsustainable finance. Here we cover someof the major initiatives by stock exchanges,
but it is not intended as comprehensive
list. These take several forms and are often
supported by membership of the UN’s
Sustainable Stock Exchanges Initiative (SSE).

Green Exchange (STAGE), an online portal
providing greater information, access andtransparency on a wide range of sustainable,
green and social investment products.177,178
The portal will also help issuers, asset
managers, investors and professional
advisers on the positioning, innovation, andmarketing of sustainable and green finance.

Stock exchanges and indices

The Korea Exchange launched a dedicatedsegment for Socially Responsible Investment(SRI) bonds, as well as a public information
portal to provide accurate and transparent
information on such deals, last June.179
Meanwhile, to boost the SRI bond market,
in line with the launch of the new segment,
the exchange signed MOUs with external
evaluation institutions and provides financial
support for SRI bond issuers, such as thesebeing exempt from listing fees and annual
dues for three years following issuance toreduce funding expenses.

A recently announced
joint effort between
former BoE governorMark Carney and theLondon Stock Exchangeplans to establish a
global coalition of stock
exchanges supporting climate disclosure,in line with TCFD recommendations.175 In
partnership with the SSE, the climate disclosure
initiative is intended to encourage exchanges
to do more to help issuers transition towards
decarbonisation. The SSE will establish a newworkstream that the London Stock ExchangeGroup will chair, drawing up best practicereporting guidance on climate disclosure.
These guidelines can then be used bycorporate issuers, wherever they are listed.
With investors needing globally consistent,
quality climate and sustainability data to
inform investment decisions, exchanges canplay a critical role to improve the availability
and consistency of this data and reinforce
global standards.
The Nasdaq Sustainable Bond Network(NSBN) is another important and related
development. This newly created initiative
serves as a global, publicly available,
web-based platform designed to improvetransparency in the market for green,social and sustainability bonds.176 It is an
online repository that provides issuers ofsustainable debt instruments the ability
to voluntarily publish key information anddata regarding their specific bonds on acentralised platform - in turn, this provides
investors, other market actors, and thegeneral public, with the information theyneed to compare bonds successfully. An
external review is recommended by the
NSBN, although not required for inclusion.
Hong Kong is maintaining its focus on
green finance with new policy settings toencourage transition and sustainable finance.
The Hong Kong Monetary Authority andthe Securities and Futures Commission
have established the Green and Sustainable
Finance Cross-Agency Steering Group,
which includes various other members,
as well as launching the Sustainable andLuxembourg’s Green Exchange, selfdescribed as “the first exchange to translateindustry best practices for sustainablefinancial instruments into mandatory
requirements”, is a dedicated platform of
LuxSE with strict transparency requirements
in its eligibility criteria, including external
reviews of actual use of proceeds.180,181 This
follows the long-standing incorporation oftransparency requirements into LuxSE’s
governance principles in 2006.182
The London Stock Exchange (LSE) launcheda Sustainable Bond Market (SBM) in October
2019, building on its Green Bond Segment
launched in 2015. The LSE introduced
mandatory annual post-issuance reporting for
issuers listed on the SBM so as to maintaintransparency and continued eligibility – ithas so far raised GBP47bn.183,184 At the sametime, the exchange announced the launch of
it Green Economy Mark initiative, recognising
equity issuers with green revenues of 50% or
more, as well as releasing a Guide to Green
Finance and hosting its first Sustainable
Finance Summit.185,186
In a somewhat similar vein, the Johannesburg
Stock Exchange’s (JSE) Green Bond
Segment has been expanded to a fullyfledged Sustainability Segment as of July,allowing interested issuers to list social andsustainability bonds along with green bonds.187
In the Middle East, the Bahrain Bourse
has published a new ESG Reporting Guide
to encourage and assist listed issuers inproviding ESG information used to inform
investor decision-making while also
supporting companies to align with Bahrain’s
Economic Vision 2030 and the SDGs.188,189

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

Meanwhile, Abu Dhabi’s Department ofEnergy (DoE) has launched a Green Bond
Accelerator initiative with Abu Dhabi
Global Market (ADGM) and the Abu Dhabi
Securities Exchange (ADX).190 Launched in
January 2020, its objective is to establish
Abu Dhabi as a regional hub for green
bond and green sukuk issuance targetingsustainable projects in the Emirate as wellas across the rest of the Middle East andAfrica. The bonds will be listed on the ADX
and must support projects that comply with
the DoE’s new green bonds policy.191 The
inclusion of blue and transition bonds is also
said to be under consideration.
Moving to Latin America, the Mexican
Stock Exchange (BMV) recently launched
the S&P/BMV Total Mexico ESG Index,
partnering with S&P Dow Jones Indices (S&P
DJI).192 The index uses rules-based selection
criteria based on relevant ESG principles
to choose its constituents from the newly
launched S&P/BMV Total Mexico Index, abroad benchmark consisting of stocks andReal Estate Investment Trusts (REITs) listedon the BMV.193 The objective of the ESG
index is to give investors core exposure to
the Mexican equity market while providing
a significant boost in ESG score performance.
Other stock exchanges from the region are
also increasingly working to develop andpromote green finance in their respective
countries. While there are several examples,
Costa Rica’s BNV leads the way. It publisheda Guide for the Definition and Managementof Green Projects,194 targeted at potential
green bond issuers, as well as a Green
Bond Guide and Voluntary Guidance on ESG
Reporting, in late 2018.195 The stock exchange
has taken several other steps to develop
the green bond market, such as offering a
dedicated and promote wider sustainability
engagement and market development. It has
also released guides for Social Bond196 andSustainability Bond issuance197 and launched
the BNV Sustainability Awards in 2019 to
reward capital market participants acrossseveral sustainability categories.198
Further, the Inter-American Development
Bank (IDB) is launching a Green Bond
Transparency Platform (GBTP) which will
provide an open access, centralised way ofobtaining details about green bonds in Latin
America, including their use of proceeds
and environmental impacts, as well as
relevant documentation. Despite not being a
stock exchange initiative, it is an importantdevelopment expected to drive transparency
and comparability in the market (in someways similar to the NSBN).199

30

Conclusion: lessons for the critical 20s
Heraclitus, the Greek philosopher, is coinedwith saying that “the only constant ischange”. In human systems, this has neverbeen more true than it is today. The ongoing– and worsening – environmental crisis, with
impacts ranging from climate change tobiodiversity loss, pollution, soil degradation,and pandemics, has brought this to the fore
more than ever, to a level impossible toignore any longer.
The COVID-19 virus naturally poses serious
health risks, but we can be thankful that it
is nowhere near as deadly as others, suchas Ebola or SARS. If it were – and it is notunreasonable to think that future global
outbreaks might be – we would be in a much
more dire place. The full extent of economic
impacts, however, still remains to be seen,
and will likely still take a while to be fully
understood.

The bigger picture
Negative shocks suchas COVID-19 are here
to stay. The question
is for how long, andto what extent. And
that depends on our
response.
On one hand, this means adapting to
the effects of environmental damage, forexample by investing in climate adaptationand implementing systems to respond more
quickly and effectively to shocks, especiallyamong more vulnerable populations andregions. This is a vital question of resilience –environmental, social (including health), andeconomic. COVID-19 has clearly highlighted
our unpreparedness in this domain, withvarious countries struggling to know how toreact and/or not reacting fast enough.
On the other hand, mitigation of climatechange and other sources of environmental
stress is critical. Our response on this mustcome through a much deeper appreciationof life on this incredible planet, of our placein it, and of the systems we have createdas a means of developing and evolving.
Recognising this, we must be open tochallenging the foundations and innerworkings of those systems, because thereinlie the root causes of many – probably most– of our crises.
While a powerful force for production,
innovation and development, capitalism in
its current form ignores broader systemic
health by treating private actors – be they
individuals or entities – as independent fromeach other, seeking only to maximise theirgains. Furthermore, treating impacts that
affect actors not engaged in transactions
as ‘external’ leaves these out of market
considerations. Yet those impacts – bethey GHG emissions, water pollution, or
unemployment – are as real as the electricity,phones or cars being bought. One mightargue this set up has fuelled success sofar; in some ways this might be true, but asystem that leads to its own destruction
ultimately cannot be considered successful.
It is therefore clear we cannot keep doing
the same, even if we do it more efficiently.
Einstein is believed to have said that “wecannot solve our problems with the same levelof thinking that created them”. Right now,understanding this is crucial to our survival.
The effects of this paradigm shift willreverberate across the global economy,
from small producers to large multinational
conglomerates, banks to private equity firms
to institutional investors, central banks to local
and national governments, and the executive
on Wall Street to the rice farmer in rural China.

Implications forsustainable finance
Sustainable financeinstruments are one
avenue for channelling
funds into projects andassets with positiveenvironmental and/or
social impacts, both tomeet the needs of private and public sector
entities. Work in this space has intensified
noticeably in the last couple of years.
The market is evolving, and this will likely
accelerate given the ongoing pandemic andincreased attention placed on sustainability
themes. The transparency and accountabilityof the ‘use-of-proceeds’ model have worked
relatively well so far, but such instruments
will most likely not be enough to meet thelarge financing needs of the transition; others– such as transition bonds or performancelinked products – will be necessary.
In the context of governments, the urgent
need for stimulus packages to kickstarteconomies worldwide presents a valuable
opportunity for change through the ‘build
back better’ agenda, which may include anincreased use of labelled debt. But beyond
essential stimulus measures, which will
understandably be focused on stemming theimmediate negative health and economic
impacts of COVID-19, there is a clear needto ‘think bigger’, and for the wider policy
landscape to evolve.

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

The ECB’s Schnabel, for example, recently
mentioned that despite the COVID-19 healthshock being entirely unrelated to monetary
policy, it nevertheless has huge implications
for it – the same being true for climatechange, hence why central banks cannot
ignore it. She added that “there is the viewthat we should stick very closely to market
neutrality and there is the alternative viewthat markets are not pricing climate risks
properly, so there is a market distortion andtherefore market neutrality may not actually
be the right benchmark.”200 Central banks
can thus be powerful agents of change,
but will need to be supported by broader
economic policy and initiatives by regulators,
stock exchanges, financial institutions, andrelated networks.
The bottom line is that greater
cooperation and coherence are needed
economy-wide to reach the goal wetruly desire: meeting our needs whileliving on a healthy, clean and fair world.
To achieve this, we need to account for
the holistic impact of our activities. In
particular, we must implement operating
frameworks aligned with this aim, so that
individual actors have a clear path andare incentivised to follow it. Improved
disclosure and common definitions, forinstance through the use of taxonomies,
are useful in informing decisions andmeasuring progress, but are still only
part of the puzzle.
Complementing this, introducing effective
feedback loops – largely absent under thecurrent economic MO – to encourage anddiscourage certain behaviours, as close as
possible to their source, is vital. This would
also help address the fact that even though
activities are climate- or Paris-aligned, suchas those included under the EU Taxonomy,
this does not mean they cannot be madebetter, both on the environmental andsocial fronts. Thus, regardless of eligibility
under a given category or taxonomy, such
improvements should be encouraged;
echoing the point made at the start, change –and evolution – are constant.
Natural systems, including biologicalorganisms, use feedback loops in abundance. It
is only logical that our economic system does
the same - a form of biomimicry - in order toreflect the real impacts of our activities within
economic decisions. Individual entities are
rarely ‘bad’ even if they do bad things, however
we define these; rather, they respond to thearchitecture of the system they operate in. If
it pays to do bad things, some will, and canhardly be blamed for it.

31

Appendix A
The following charts show the compositionof labels in each theme. For simplicity, only
the top 10 labels are shown for the green andsocial themes (the rest combined into ‘Other’).

Green labels

Climate awarenessGreen
rewards

Green

USD 868 bn

0

20%

40%

60%

Solar

Environmental

Water

Positive impact

Environmental sustainability

Other

Sustainability labels

0100%
ClimateSDG

Sustainability

USD 210 bn

80%

Sustainable development

20%

40%

60%

ESG

SIRI

Sustainable

80%

100%
Green and social

Sustainability awareness

Affordable housing

Social labels

Education, youth and employment (EYE)
Social inclusion
SDG housing

Social

USD 86 bn

0

Social housing

20%

Vaccine40%

60%
Healthcare

Gender

Wellbeing

80%

100%
Women

Other

Pandemic labels

Response
COVID-19 reponse social inclusion
Fight COVID-19

Pandemic

USD 75 bn

020%
COVID-19

40%

60%

80%

100%

COVID-19 response sustainability

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative32

Appendix B
Methodology notes & caveats
1. Due to the methodological difference
between Green and other themes, it isimportant to note that our analysis ofother themes is merely an indicator of
the financing aimed at each, based on thedeal’s label.
For instance, some deals labelled as‘SDG’, and therefore included under the
Sustainability theme, may only actuallyfinance social projects. Importantly, there
will also, for example, be various deals
under the Social and Sustainability themesthat finance, in whole or in part, pandemicrelated investments. We are working on the
more granular UoP analysis for other themes
and will share the results in due course.
2. Some of the analysis is shown in terms of‘number of issuers’ rather ‘amount issued’– this reflects the number of issuers in eachindividual theme. The total number of issuers
is slightly lower than the total adding acrossthemes, since some issuers have printed
deals that cover more than one theme. For
example, the infographic shows 90 issuers in
the Sustainability theme, 106 in Social, and
447 in Pandemic; adding these gives a totalof 643, but it is actually 627.
3. Our Green Bond Database includes manyloans and ABS (securitised) deals. We havehistorically treated these as issuer types, andthe same applies to this report. However,under our new methodology, these areconsidered different instrument – not issuer– types. Within the SSP themes, it is not yet
common to see loans or ABS deals with asustainability, social, or pandemic label (areminder that performance-linked loans are
not included).

Understanding green bonds
Green bonds

Inclusion in our Green Bond Database

Green bonds are issued to raisefinance for climate change solutions the key is for the proceeds to go togreen assets. They can be printed
by various issuer types, such as
governments and government-backed
entities, financial institutions, and nonfinancial corporates.

Only labelled bonds with all net proceeds
dedicated to green assets and projectsaligned with the Climate Bonds Taxonomy,
are included in our Green Bond Database andfigures. If there is insufficient information on
the use of proceeds, a bond may be excluded.
The full new version of the Climate Bonds
Green Bond Database Methodology isavailable on the CBI website.203

The green label can be applied toany debt format, including private
placements, securitisations, coveredbonds, and sukuk, as well as green loans
which comply with the Green Bond
Principles (GBP) and/or the Green Loan
Principles (GLP).201,202
It is important to keep in mind thatthe label itself does not need to be‘green’ for the deal to be considered agreen bond (although most green bonds
actually do carry a ‘green’ label). Myriadlabels are applied in practice, such as‘Sustainability’, ‘SDG’, ‘Climate’ or more
specific ones like ‘Renewable Energy’,‘Solar’, or ‘Blue’ (see Appendix A).

4. In addition to the exclusion of
performance-linked instruments andtransition labels, we excluded:• Several deals because we could not findpublicly available labels (this included
some by repeat issuers, most of which
had issued clearly labelled deals – where
possible, we suggest improving theavailability and clarity of information
related to each deal, including labels)• Nine Chinese deals due to lack of
information about key details, such as date
and amount issued

Climate Bonds Database
updates
Climate Bonds has been expanding data
coverage to other labelled debt instruments– particularly sustainability and social bonds– and a separate database covering these will
be launched shortly. The extended database
will complement other enhancements to ourdata, such as the collection of more granular
information on the use of proceeds andimpacts of green bonds, more robust anddetailed analysis of climate-aligned issuers,
and a more detailed assessment of SDG
alignment.

Green definitions
The Climate Bonds Initiative Green Bond
Database and market analysis is based on
the Climate Bonds Taxonomy categories:
Energy, Buildings, Transport, Water,
Waste, Land use, Industry, and ICT.204
CBI also develops Sector Criteria withexpert input from the international science
community and industry professionals.205
Issuers can certify their green debt instruments
under the Climate Bonds Standard and these
Sector Criteria.206 Independent Approved
Verifiers provide a third-party assessmentthat the use of proceeds complies with theobjective of capping global warming at 2°C.

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative33

Endnotes
1. Climate Bonds Initiative, Financing Credible Transitions, 2020.
2. Climate Bonds Initiative, Green Bonds Global State of the Market 2019. 2019
3. Social figures thus exclude deals with a pandemic-related label.
4. This may be adjusted as we improve our data tracking and collection
processes, especially for the sustainability, social and pandemic themes.
5. Climate Bonds Initiative, Green Bond Database Methodology, 2020.
6. Climate Bonds Initiative, Climate Bonds Taxonomy, 2020.
7. Climate Bonds Initiative, Green Bond Pricing in Primary Market: H1 (Q1-Q2)
2020, 2020.
8. Climate Bonds Initiative, Green bonds market summary - H1 2020, 2020.
9. MSCI, Market Classification, 2020.
10. Although there has been issuance from Asian – including Chinese –national development banks for other debt themes
11. ICMA, Sustainability Bond Guidelines, 2018.
12. WHO, Climate change and human health, 2020.
13. TSKB, TSKB issues the first ever green bond out of Turkey, 2016.
14. Development Bank of Japan, Sustainability Bond Framework, 2015.
15. Luxembourg Green Exchange
16. NRW, Inaugural Sustainability Bond, 201517. Ahold Delhaize, Sustainability Bond Framework, 201918. Pfizer, Sustainability Bond Framework, 2020
19. EIB, Sustainability Awareness Bonds, 2019
20. For more details, see CBI Programmatic Certification. 2020
21. Climate Bonds Initiative, Certified Bonds
22. Luxembourg Government, Successful issuance of the first sovereign
sustainability bond in Europe, 2020
23. As noted by ICMA in Impact Invest Lab: Social Bonds 2018, the IFC bonds
originally carried other labels and were only merged into IFC’s Social Bond
Programme in 2017.
24. Natixis, Natixis sole structurer for Unédic’s record inaugural social bond,2020.
25. ISDB, Sustainable Finance Framework, 201926. The aim was to capture the top eight currencies by volume, yet somecurrencies had issuance pre-2014 but none or little between 2014-20. Thus,
the top eight between 2014-20 were selected, resulting in the inclusion of
CAD and exclusion of ZAR
27. World Bank, World Bank Launches First-Ever Pandemic Bonds, 2017
28. World Bank, Fact Sheet: Pandemic Emergency Financing Facility, 2020.
29. ICMA, Q&A for Social Bonds related to Covid-19, 2020.
30. BBVA, BBVA places €1bn in the first issue of a social bond COVID-19, 2020
31. IFR, Kookmin Bank prints Korea’s first Covid-19 bond, 2020.
32. Getinge, Getinge issues SEK1bn COVID-19 commercial paper, 2020.
33. AfDB, AfDB launches record $3bn ‘Fight COVID-19’ Social Bond, 2020.
34. NIB, NIB Response Bond Framework, 2020.
35. COE, CEB issues social inclusion bond, 2020.
36. IEA, The impact of the Covid-19 crisis on clean energy progress, 2020.
37. FC4S, Implications of the Covid-19 Pandemic for Global Sustainable Finance,
2020.
38. UNFCCC, Medical Professionals Want Green Recovery from COVID-19, 2020.
39. Energy Transitions Commission, COVID Recovery Letter, 2020.
40. S&P Global Market Intelligence, Stepping Up to a Sustainable Future Post
COVID-19, 2020
41. Environmental Finance, Develop principles to govern digital finance andSDGs, 2020
42. UNSDG, People’s Money: Harnessing Digitalization to Finance a Sustainable
Future, 2020.
43. UNEP, COVID-19: Four Sustainable Development Goals that help future-proof
global recovery, 2020.
44. EU TEG, 5 high-level principles for Recovery & Resilience, 2020.
45. Financial Post, Using the Tools of Climate Investing to Battle Injustice,2020.
46 HSBC, 7 Priorities to Help the Global Economy Recover, 2020
47. Moody’s, Coronavirus raises advanced economies’ debt burdens, 2020
48. FT, UK public debt exceeds 100% of GDP for first time since 1963, 2020.
49. Moody’s, Coronavirus raises advanced economies’ debt burdens, 2020.
50. Energy Transitions Commission, COVID Recovery Letter, 2020.
51. UNCTAD, World Investment Report 2020, 2020
52. EBRD, EBRD’s coronavirus Solidarity Package. 2020.
53. Environmental Finance, Impact rescue facility, 2020.
54. OECD, Building Back Better: A Sustainable, Resilient Recovery after COVID-19,
2020
55. Eco-Business, Duterte’s Covid-19 recovery plan criticised, 2020
56. OECD, Building Back Better: A Sustainable, Resilient Recovery after COVID-19,
2020
57. Climate Bonds Initiative, Green Bond Treasurer Survey 2020, 2020.
58. EC, Europe’s moment: Repair and prepare for the next generation, 2020
59. EC, The pillars of Next Generation EU, 2020.
60. EC, The pillars of Next Generation EU, 2020.
61. S&P Global Ratings, The EU Recovery Plan Could Create Its Own Green Safe
Asset, 2020.
62. Bond Vigilantes, Will the EU Recovery Fund kickstart the green bond market?,
2020.
63. Environmental Finance, ECB asset purchases could encourage more green
bonds, 2020
64. FT, The EU pandemic fund will transform the investment landscape, 2020.
65. FT, The EU pandemic fund will transform the investment landscape, 2020
66. EC, 2021-2027 long-term EU budget & Next Generation EU, 2020
67. Reuters, EU makes world’s biggest ‘green recovery’ pledge, 2020.
68. GOV.UK, £1.3bn investment to deliver homes, infrastructure and jobs, 2020.
69. CGTN, UK unveils economic recovery plan, 2020
70. GOV.UK, Guidance: Getting Building Fund, 2020
71. CDEV CEEFC, Large Employer Emergency Financing Facility Factsheet.
72. Environmental Finance, Canadian firms must file TCFD reports to get
Covid-19 bailout, 2020.
73. Korea Times, Korea to focus on digital, green initiatives, 2020.
74. Climate Home News, South Korea to implement Green New Deal, 2020.
75. This deal is currently pending inclusion in our Green Bond Database as we
obtain more information on its UoP.

76. Environmental Finance, Bond round-up: IBRD, Manila Water, Eurofima,
Thailand, 29 July 2020
77. Government.no, Economic measures in Norway in response to Covid-19,
2020.
78. Policy Exchange, Driving Down Emissions: How to clean up road transport?,
2017.
79. EC, A hydrogen strategy for a climate-neutral Europe, 2020.
80. Nigeria State House, What You Need to Know About the Nigeria Economic
Sustainability Plan, 2020.
81. Bloomberg, Oil Crash Spurs Nigeria to End Fuel Subsidies, 2020.
82. Hindustan Times, Petrol, diesel prices revised further, 2020.
83. FT, Coronavirus will hasten ‘peak oil’ by three years, 2020.
84. FT, Why we may have already seen the peak in oil demand, 2020.
85. Reuters, EU eyes sustainable fuel quotas to tackle aviation emissions, 2020.
86. Transport & Environment, Bailout tracker.
87. Global Citizen, Global Citizen Mobilized Over $1.5B in Cash Grants, 2020.
88. EBRD, EBRD’s coronavirus Solidarity Package.
89. https://www.icmagroup.org/assets/documents/Regulatory/GreenBonds/LMASustainabilityLinkedLoanPrinciples-270919.pdf
90. ICMA, LMA Sustainability Linked Loan Principles, 2019.
91. IFR, ICMA drives ESG bond issuance with new principles, 2020
92. ICMA, Mapping to the SDGs
93. Cairn, Comparison of the EU vs. Chinese Emissions Trading Systems.
94. EC, Taxonomy: Final report of the TEG on Sustainable Finance, 2020.
95. Climate Bonds Initiative, Green Bond Endorsed Projects Catalogue (2020
Edition).2020.
96. World Bank, How to Develop a National Green Taxonomy for Emerging
Markets, 2020.
97. Environmental Finance, $5trn of investors set ‘unprecedented’ 1.5°Cemissions target, 2020.
98. Environmental Finance, It’s time for ESSG, 2020.
99. Environmental Finance, EU taxonomy has lessons for impact investing, 2020.
100. Environmental Finance, Big data ‘can help assess country ESG risk’, 2020.
101. FTSE Russell, Sizing the green economy: Green Revenues and the EU
taxonomy, 2020.
102. EC, EU Green Bond Standard
103. Climate Bonds Initiative, Green Bond Endorsed Projects Catalogue (2020
Edition). 2020.
104. Climate Bonds Initiative, PBoC Takes Post COP21 Step on Green Bonds,
2015.
105. Climate Bonds Initiative, Roadmap for China: Green Bond Guidelines for the
Next Stage of Market Growth, 2016.
106. Climate Bonds Initiative, China issues special green bonds guidelines forlisted companies, 2017.
107. Climate Bonds Initiative, Financing Credible Transitions, 2020
108. EC, The European Green Deal Investment Plan and Just Transition
Mechanism, 2020.
109. EC, Sustainable Finance110. EC, Communication from the Commission: The European Green Deal, 2019.
111. EC, Proposal for framework for achieving climate neutrality and amending
Regulation (EU) 2018/1999, 2020.
112. EC, The Just Transition Mechanism.
113. EIB, EU Bank launches ambitious new climate strategy and Energy Lending
Policy, 2019.
114. EIB, EU Bank launches ambitious new climate strategy and Energy
Lending Policy, 2019.
115. CGTN, China calls for global green revolution in the post-COVID era, 2020.
116. China Banking Regulatory Commission. Guiding Opinions on the Credit
Work for Energy Conservation and Emission Reduction. 2007.
117. China Banking Regulatory Commission. Notice of the China Banking
Regulatory Commission on Submission of Green Credit Statistics Form. 2014.
118. People’s Bank of China, Ministry of Finance, Development and Reform
Commission, Ministry of Environmental Protection, China Banking Regulatory
Commission, China Securities Regulatory Commission, and China Insurance
Regulatory Commission. Guidelines for Establishing the Green Financial
System. 2016
119. UN PAGE, The People’s Bank of China Issued the ‘Guidelines for Establishing
the Green Financial System’, 2016.
120 State Council, Integrated Reform Plan for Promoting Ecological Progress,
2015.
121. National People’s Congress, Outline of the 13th Five-Year Plan for the
National Economic and Social Development of the People’s Republic of China,
2016.
122. China Securities Regulatory Commission. Code of Corporate Governancefor Listed Companies in China. 2018.
123. China Securities Investment Fund Industry Association. Green Investment
Guidelines (Trial). 2018.
124. National Development and Reform Commission. Green Industry Guidance
Catalog (2019 Edition). 2019.
125. Memorandum of Cooperation on Initiating Members of the Green Bond
Alliance
126. Implementation Measures for Establishing the Green Financial System
127. Z-Park, Notice on the issuance of the ‘Zhongguancun National Independent
Innovation Demonstration Zone’, 2019.
128. Implementation Rules for Jiangsu Green Bond Discount Policy (Trial)
129. Implementation Rules for Jiangsu Green Bond Discount Policy (Trial)
130. “Integrated Plan of the Yangtze River Delta Ecological and Green
Integrated Development Demonstration Zone”
131. CFTC, Release Number 7963-19, 2019.
132. S&P Global MI, CFTC outlines 35-member composition of climate change
risk panel, 2019.
133. SEC, Statement on Proposed Amendments to Modernize and Enhance
Financial Disclosures, 2020.
134. FT, SEC chair warns of risks tied to ESG ratings, 2020.
135. Responsible Investor, SEC committee pushes for ESG disclosure rules, 2020.
136. Bloomberg, Trump Administration Targets ESG Funds With 401(k) Rule,2020.
137. U.S. DOL, Employee Retirement Income Security Act (ERISA).

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative

138. S&P Global MI, Major ESG investment funds outperforming S&P 500 during
COVID-19, 2020.
139. Banque de France, Open Letter on climate-related financial risks, 2019.
140. FC4S, Implications of the Covid-19 Pandemic for Global Sustainable Finance,
2020.
141. Climate Action, ECB developing an appetite for green bonds, 2020.
142. Environmental Finance, ECB gives green light to sustainability-linked
bonds, 2020.
143. ECB Blog, Our response to the coronavirus emergency, 2020.
144. FT, Lagarde puts green policy top of agenda in ECB bond buying, 2020.
145. Insurance Journal, Pandemic Shows Why Climate Change Is Major
Economic Risk, 2020.
146. NGFS, Membership, 2020.
147. NGFS, NGFS climate scenarios for central banks and supervisors, 2020.
148. NGFS, Guide to climate scenario analysis for central banks and supervisors,
2020.
149. NGFS, Guide for Supervisors: Integrating climate-related and environmental
risks into prudential supervision, 2020.
150. NGFS, A status report on financial institutions’ experiences from working
with green, non green and brown financial assets and a potential risk differential,
2020.
151. BIS, BIS launches green bond fund for central banks, 2019.
152. BIS, The Green Swan, 2020.
153. Climate Bonds Initiative, Green swan, Black swan: No matter as long as it
reduces stranded spending, 2020.
154. https://www.bis.org/publ/othp31.pdf
155. Climate Bonds Initiative, Greening the Financial System, 2019.
156. Bank of England, Bank of England consults on its proposals for stress testing,2019.
157. ACPR, L’ACPR publie les hypothèses provisoires de son exercice pilote, 2020.
158. BoE, The BoE’s climate-related financial disclosure 2020, 2020.
159. ADGM, Abu Dhabi Sustainable Finance Guiding Principles.
160. DNB, Indebted to nature: Exploring biodiversity risks for the Dutch financial
sector, 2020.
161. DNB, Value at Risk?, 2019.
162. Despite the semi-mandatory reporting requirement, the nature of real
incentives – e.g. in terms of lower borrowing cost, differentiated deposit
reserve ratio, or other risk compensation mechanisms – that the central bankwould provide to the on-lending banks is not exactly clear. The comparabilityof the self-reported green credit data from the banks is also often called
into question.
163. CBI, How the Hungarian Central Bank could help solve the energy efficiency
puzzle, 2020.
164. MAS, US$2bn Investments Programme to Support Growth of Green Finance,
2019.
165. Riksbank, Riksbank selling bonds for climate reasons, 2019.
166. IPE, Scope of Norway’s SWF oil divestment shrinks further, 2019.
167. FC4S, What we do.
168. FC4S, Members.
169. IOSCO, Sustainable Finance and the Role of Securities Regulators and
IOSCO, 2020.
170. The Pensions Regulator, Climate change joint statement.,
171. IFC, Sustainable Banking Network
172. AMF, Mandate of the new Climate and Sustainable Finance Commission,
2019.
173. CFTC, Release Number 8079-19, 2019174. BaFin, Sustainability risks: BaFin publishes Guidance Notice, 2020.
175. Environmental Finance, Mark Carney launches climate disclosure initiativewith LSE, 2020.
176. Nasdaq, Nasdaq Sustainable Bond Network.
177. Moody’s Analytics, HKMA Forms Green and Sustainable Finance CASG,
2020.
178. HKEX
179. SSE Initiative, Korea Exchange launches a sustainability bond segment,
2020.
180. LGX Brochure, 2020.
181. LGX Brochure, Listing green bonds on LuxSE, 2020.
182. LuxSE Guide to ESG Reporting.
183. LSEG, LSE Launches Green Economy Mark and SBN, 2019184. LSEG, Sustainable Bond Market.
185. LSEG, LSE Launches Green Economy Mark and SBN, 2019.
186. LSE, Sustainable Finance News September 2020. 2020
187. JSE, JSE Announces New Sustainability Segment, 2020.
188. Bahrain Bourse, ESG Reporting Guide, 2020.
189. Bahrain eGovernment, Bahrain Economic Vision 2030.
190. Zawya, Abu Dhabi’s green bond accelerator initiative, 2020.
191. Trade Arabia, Abu Dhabi DoE launches green bond initiative, 2020.
192. S&P DJI, S&P/BMV Total Mexico ESG Index.
193. Sustainable Stock Exchange Initiative, BMV Launches a New ESG Index,
2020.
194. Bolsa Nacional de Valores, Guía para la Definición y Gestión de Proyectos
Verdes.
195 Bolsa Nacional de Valores, Estandar para la Emisión de Bonos Verdes.
196. Bolsa Nacional de Valores, Estandar para la Emisión de Bonos Sociales.
197 Bolsa Nacional de Valores, Estandar para la Emisión de Bonos Sostenibles.
198. Rumbo Economico, BNV premió empresas, 2019199. Green Bond Transparency Platform.
200. Insurance Journal, Pandemic Shows Why Climate Change Is Major
Economic Risk, 2020.
201. ICMA Group, Green Bond Principles, 2018.
202. Loan Market Association, Green Loan Principles, 2018.
203. Climate Bonds Initiative, Green Bond Database Methodology, 2020.
204. Climate Bonds Initiative, Climate Bonds Taxonomy, 2020.
205. Climate Bonds Initiative, Sector Criteria, 2020.
206. Climate Bonds Initiative, Sector Criteria Available for Certification, 2020.

34

Climate Bonds Initiative Green Bond Database screening processDebtlabelled by
the issuer†

Climate
Bonds
Certification*

Green label

Other labels

Certified debt instruments that are
publicly available

Aligned Green Bond List

Non-debt instrument

Non-debt instrument list**

Confidential deals

Confidential deals list***Debt meets CBI Green Bond
Database requirements

Debt does not meet Green Bond
Database requirements

Non-aligned Green Bond List

All proceeds are for green purposes
and meet CBI Green Bond Databaserequirements

Climate Bonds Initiative Socialand Sustainability Bond Database

Note: these bonds will be included in both green bondand social & sustainability bond databases

Proceeds are partly or solely forsocial purposes† All labels are used primarily to identify bonds for screening.
In the Green Bond Database, the assessment of the green
credentials is based on the assets, projects or activities financed.
In the Social and Substitutability Bond Database, the proceeds
allocations are recorded rather than assessed.

* Certified Climate Bond/Loan is fully alignment with the Green Bond Principles/Green Loan Principles.
It can be considered as a subset of the green bond/loan market. However, Climate Bonds Certification
can be applied widely, including, but not limited to, non-debt instruments, directly to assets or projects(with no debt wrapper), and private/confidential deals.
** Certified non-debt instruments can be found on CBI website.
*** Confidential deals can be found on CBI website but certain information might
not be available to the public.

Authors: Miguel Almeida, Lionel Mok, Krista Tukiainen
Suggested citation: Almeida, M., Mok, L., Tukiainen, K.,
Sustainable Debt Global State of the Market H1 2020,
Climate Bonds Initiative, October 2020.
Design: Godfrey Design

Prepared by Climate Bonds Initiative.

© Published by Climate Bonds Initiative, October 2020www.climatebonds.net

Disclaimer: The information contained in this communication does not constitute investment advice in any form and the Climate Bonds Initiative is not an investment adviser. Any reference
to a financial organisation or debt instrument or investment product is for information purposes only. Links to external websites are for information purposes only. The Climate Bonds
Initiative accepts no responsibility for content on external websites. The Climate Bonds Initiative is not endorsing, recommending or advising on the financial merits or otherwise of any debt
instrument or investment product and no information within this communication should be taken as such, nor should any information in this communication be relied upon in making any
investment decision. Certification under the Climate Bond Standard only reflects the climate attributes of the use of proceeds of a designated debt instrument. It does not reflect the credit
worthiness of the designated debt instrument, nor its compliance with national or international laws. A decision to invest in anything is solely yours. The Climate Bonds Initiative accepts noliability of any kind, for any investment an individual or organisation makes, nor for any investment made by third parties on behalf of an individual or organisation, based in whole or in parton any information contained within this, or any other Climate Bonds Initiative public communication.

Sustainable Debt Global State of the Market H1 2020 Climate Bonds Initiative35