(Bloomberg) --
Global issuance of debt that meets sustainability criteria will reach a record of at least $1 trillion next year, according to a new forecast by SEB AB.
The Swedish bank, which was the first ever to arrange a green bond over a decade ago, says 2020 marked the point at which “the transition to a fossil-free production system took off,” in a report published on Thursday.
After a brief slowdown during the pandemic, demand for debt that meets environmental, social and governance criteria bounced back. Issuance this year looks set to reach around $650 billion; in 2021, green bonds alone will reach close to $500 billion, with new types of sustainable loans driving additional growth, according to SEB.
“In a year of both stress and ongoing tests, one could easily imagine that finance would go to safe havens,” Christopher Flensborg, head of climate and sustainable finance at the Stockholm-based bank, said in a statement. “But the world has gone sustainable.”
Investors are keen to buy the new debt, with demand to date far outstripping supply. And concerns about standardization of corporate disclosure are also slowly being addressed, gradually helping to create more transparency around ESG debt.
Meanwhile, investors appear to be accepting a broader definition of what constitutes a climate friendly asset, with sustainability-linked products expected to grow. Issuance of such debt is this year likely to meet or beat the $145 billion total sold in 2019, as loan volumes in particular look set to be “significantly higher,” the bank said.
But SEB warned that the pandemic continues to delay investment decisions, and that much will hinge on how the coronavirus crisis develops and whether enough people get access to vaccines.
©2020 Bloomberg L.P.
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