What’s Happening in Sustainable Finance: Evidence of a Social Bond Premium, the Elements of a Just Transition and More

2022/2/25

ESG in Conversation

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Episode Summary Hosts

Nicholas Gandolfo, Director, Corporate Solutions
Marika Stocker, Senior Manager, Corporate Solutions

In this episode, Nick and Marika provide a run-down of notable deals in the sustainable finance market, from sovereigns issuing sustainable debt, to corporate activity in green and social bonds and loans, to the introduction of new products and structures. They also answer audience questions about the outlook for labeled transition bonds and possible biodiversity-related indicators for linked transactions.

A Premium for Social Bond Issuances?

While evidence of a premium for green bonds – or greenium – continues to emerge, a similar advantage is being seen for social bond issuances). According to research, compared with conventional bond equivalents, social bonds received a yield discount of around 12 basis points at issuance. The explosion of social bond issuance in response to the COVID-19 pandemic, and the oversubscription of social bonds are contributing to this social premium or “socium” found for some social bond issues.

Insight on Elements for a Just Transition

The World Benchmarking Alliance) published a report examining the social elements of companies’ low carbon transition. The report assessed 180 companies across three sectors – oil and gas, electric utilities, and automotive – and found that the majority of high-emitting companies are not taking action to move toward a just transition. Other key findings suggest the people most at risk are left out of decision making; companies will need to reskill their workforce as part of their transition plans; companies are not using their influence to advocate for a just transition; and that a just transition needs to be underpinned by companies’ respect for human rights. Hopefully, we’ll see some of the findings from this report reflected in the performance indicators and use of proceeds of sustainable finance transactions going forward.

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