Sustainability loans outpace green loans and bonds



Sustainability-related loans have emerged as an alternative to traditional ESG debt and have supplanted green loans and bonds as the primary mode of financing globally, according to the new analysis from S&P Global Market Intelligence.

The European Union has adopted a product that gives companies a discount on the achievement of individual sustainability goals. According to S&P Global, resilience-related loans in the European leveraged loan market rose sharply in the first half of this year and are likely to spread to mid-cap and SMEs.

The product has no restrictions on the use of proceeds, unlike green debt.

Sustainable development lending totaled $ 350 billion in the first half of 2021, up from $ 197 billion last year. This is a dramatic figure compared to green loans, which totaled $ 42 billion this year.

Of the world’s total, North American firms’ emissions have reached $ 122 billion, which is a significant figure. according to data from Bank of America.

Interest in ESG initiatives has skyrocketed recently, but some experts warn that ecology is a serious problem… A recent sector report from Generation Investment Management notes that while ESG initiatives “offer great opportunities for sustainable investment … they will do more harm than good if we cannot set the bar high.”

“There is growing concern about the poor quality of some of the zero-margin commitments, the lack of impediments to natural solutions, and the resilience of offset markets,” the report said. “Misleading sustainability claims are also spreading at an alarming rate on the Internet.”

Some are even considering loans related to sustainability. like “just good PR”, motivated by public opinion rather than actual commitment to ESG principles.

“To be honest, the rate cuts that you are seeing are marginal, but it creates a lot of good public relations for these companies and that they practice what they preach.” – Glenn Brill, Managing Director of Real Estate Business Solutions Practice … consulting firm FTI Consulting told in an earlier interview. While some firms are reporting a 10 basis point reduction in borrowing costs, “this is usually about five basis points or less,” Brill said.

However, commercial real estate companies and REITs began investing in ESG commitments long before the COVID-19 pandemic. the pace is increasing significantly during 2020 and showing no signs of stopping… Blackrock CEO Larry Fink announced plans at last year’s Morningstar investment conference to integrate ESG metrics into 100% of the company’s portfolio by the end of the year and reiterated that commitment in his letter to CEOs this year.

“Throughout 2020, we’ve seen dedicated companies with the best environmental, social and governance characteristics outperform their competitors,” he wrote. “It is clear that communicating with stakeholders – building trust and targeted action – allows a company to understand and respond to changes in the world. The more your company can demonstrate its goal of delivering value to your customers, your employees and your communities, the better you will be able to compete and deliver long-term and sustainable shareholder returns. ”


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