Sustainable Finance Insights on Transition Finance, Sustainability-Linked Bonds, Sovereign Bonds and More

Episode Summary Hosts Nicholas Gandolfo, Director, Corporate Solutions Marika Stocker, Senior Manager, Corporate Solutions In this episode , Nick and Marika discuss the bustling labeled bond market and its ongoing diversification in terms of the types of issuers, geographies, the use of proceeds and products. As the year rolls on, the sustainable finance market continues to produce strong volumes in terms of the number of transactions and their value. They also highlight developments around transition finance guidance as well as new and updated principles in the loan market. As always, they take a couple listener questions, this time focused on how bonds are labeled and the emergence of combined instruments. Sovereign activity in the bonds space Activity in the labeled sovereign bond market looks to be heating up for 2021. Several nations including Russia, Canada, Hungary, UK are considering issuing sustainable sovereign bonds. We’ll keep an eye on this space to see which countries come to market with green, social or sustainability sovereign bonds. Transition finance More is being written about transition finance and whether sustainability-linked bonds (SLBs) have taken their place in the market. No doubt SLBs have come on strong, but we see diversification, especially with respect to product, as important for overall market health. Nick notes some of the challenges that could account for the low number of labeled transition finance thus far but anticipates that in time we will see more transition bond issuances. Nick also highlights two transition-focused reports worth checking out - The Transition Pathways Initiative’s annual "State of Transition" and Natixis’ "Transition Tightrope" series. Continuing momentum of SLBs On the SLB front, the segment continues to grow. Transactions beget more transactions as borrowers and lenders gain confidence in the instrument. While some observers have doubted a handful of issuances due to questions around the materiality, relevance and ambitiousness of their sustainability performance targets and KPIs, the scrutiny is ultimately good and will raise the caliber of SLBs coming to market. Key moments 00:09 Introduction 00:55 Market news 02:20 TPI “State of Transition” report 03:05 Ongoing developments in China 03:55 Transition bonds vs SLB? 05:07 Natixis “Transition Tight Rope” report series 05:40 EU Taxonomy developments 06:31 Social Loan Principles released 07:07 ELFA/LMA - ESG considerations in leveraged loan paper 08:11 Bond issuance overview 13:21 Loan transactions overview 14:18 Sustainability-linked bonds overview 18:54 Questions 22:31 Sustainability-linked loan overview 27:04 Transition bond overview 29:01 Regulatory updates   Links to select resources Transition Pathway Initiative: TPI State Transition 2021 Report Natixis: Brown Industries: The Transition Tightrope European Leveraged Finance Association (ELFA)/Loan Market Association (LMA): Guide to Company Adviser to ESG Disclosure in Leveraged Finance Transactions APLMA/LMA/LSTA: Social Loan Principles (new) APLMA/LMA/LSTA: Sustainability-Linked Loan Principles (updated) Science Based Targets: Public consultation for maritime transport sector FedEx Sustainability Bond: Framework | Second-Party Opinion NAVER Sustainability Bond: Framework | Second-Party Opinion | News Release Berlin Hyp Sustainability-Linked Bond: Framework | Second-Party Opinion Environmental Finance: Amundi launches first ‘just transition’ climate fund More Episodes

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