Covid-19 has caused a drastic downturn in sustainable lending. That’s according to a new report by Refinitiv. The report notes that despite the positive momentum behind sustainable lending throughout 2019, ESG financing has become a bit of a concern.
“Despite the profound market slowdown in late February and March, over $64.5 billion in green and sustainability-linked global loan and bond volume was completed in 1Q20,” the report states. “The results represented a 5% increase over year ago totals ($61.2 billion) but a disappointing nearly 50% decline compared to those of 4Q19 ($125 billion).”
Noteworthy statistics from the report include:
- Less than $65 billion of combined green and ESG-linked loan and bond issuance was completed globally in 1Q20. Totals were up 5% year over year but 48% off 4Q19 results. Year to date, an additional $32.7 billion in dealflow has been announced bringing total year to date volume to an anticipated $97 billion.
- 1Q20 global green bond volume totaled $36.2 billion, down 5% compared to year ago totals and off a more substantial 33% compared to 4Q19 results. More than $22 billion or nearly 61% of total issuance was raised in Europe, the Middle East and Africa followed by the Americas with $8.3 billion, or 23% of global volume and the Asia Pacific region with nearly $5.6 billion, or over 15% of total lending.
- 1Q20 global green and ESG-linked loan volume totaled over $28.3 billion, up 22% compared to year ago totals, but off 60% compared to the strong 4Q19 results. Year over year, issuance backing green projects was up with over $5 billion in loan volume. Buoyed by a strong start to the 2020 calendar, ESG-linked lending was also up year over year with $23 billion of issuance although the pipeline did slow as COVID-19 related concerns mounted.
Sustainable lending has proven its popularity in recent years. In fact, in February of this year, WSP Global Inc. announced it became the first professional services firm in the Americas to secure sustainability-linked terms for its syndicated credit facility. WSP signed an amendment to its existing credit facility to include financing terms that reduce or increase the borrowing costs on the lending facility as sustainability targets are met or missed.
The amendment introduced an annual pricing adjustment based on the achievement of ambitious targets related to sustainability. According to WSP, this step reflects the company’s goal to create compelling business value through advancing its vision to have a long-lasting positive impact on society.