- March 9, 2022
- Posted by: Bastion team
- Category: World News
Investors want to see transition plans that can deliver significant impact and are achievable, given their accountability to unit holders.
Globally the sustainable finance market has grown 10 times since 2016 and increased by up to three times in size last year alone – driven by the sustainability-led agendas of issuers and the growth of ESG mandates among institutional investors.
Issuers are also further incentivised to issue in an ESG labelled format given the emerging “greenium” or premium in capital markets, reflecting the high demand from investors for issuers with strong sustainability credentials.
BloombergNEF data shows that more than $1.6 trillion in sustainable debt instruments were issued globally in 2021, bringing the total outstanding market to over $4 trillion.
In Australia, sustainable bond issuance grew from circa $12 billion in 2019 to around $20 billion last year, totalling around $50 billion of sustainable bonds outstanding in the domestic market – around 2 per cent of the total bond market in Australia. We estimate the Australian sustainable bond market has the potential to grow to $350 billion over the next decade to support our transition targets.
Given this level of supply and changing market dynamics, we see a “first mover” advantage for issuers in a position to access the market sooner.
Current market volatility may actually speed up the pace of transition even further, with increased funding costs, rising carbon prices and reputational…