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January 2023 | Sustainable Finance Market Highlights

The SPO in a demanding financial environment

Last year was the first since 2011 during which green, social, sustainability and sustainability-linked (GSSS) bond volumes decreased, according to Environmental Finance. Unquestionably, the prior two years were exceptional. The COVID pandemic pushed many issuers, especially financial institutions and sub-sovereign and agencies (SSAs), to raise funds for supporting the real economy, and favorable market conditions kept capital costs low, fueling impressive YoY growth for issuances. In 2022, the invasion of Ukraine, rising energy costs, higher inflation and the first tightening measures implemented by central banks in years, made access to capital markets more expensive, not only for high yield issuers (which almost completely disappeared) but also for investment grade issuers, resulting in a 20% decrease vs 2021 (ICMA).

From our vantage point, the slowdown was particularly visible in the fourth quarter, with issuers suspending or postponing their operations. At the same time, a trend that emerged in the post-issuance phase at the beginning of the year was reinforced: both use of proceeds (UoP) and sustainability-linked bond (SLB) issuers started to enhance their reporting, to better inform investors about their progress on the SPTs and the allocation of proceeds. Thus, on top of significant SPO projects, such as CNP Assurances, Connect 6ix, and Fonterra, we assisted various issuers including Republic of Serbia and Assura with the review of their bond reports.

This new interest in the post-issuance phase, coupled with the first forecasts for a positive 2023, sent GSSS issuances back to 2021 levels, Reuters reported. This stresses more strongly than ever the importance of quality and credibility in the sustainable bond issuance process. Investors are getting more sophisticated and demanding and the complexities and shortcomings of SLBs may overshadow their benefits, according to Responsible Investor. The scrutiny of the sustainable finance environment overall is increasing.

Our domain, especially the external review process, remains unregulated and based on voluntary guidelines and good market practices. Regulators are looking at it, but it may take time before we see any concrete intervention, considering that the EU Green Bond Standard process is delayed (ICMA). In a market where integrity is periodically questioned, taking advantage of the support and the experience of a recognized SPO provider helps issuers with a thorough analysis of their frameworks, identifying potential flaws and averting any reputational backlash.


Paul Hodgson, Senior Editor
Aditi Aier, Senior Associate
Carmen Luk, Senior Associate

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ISS Corporate Solutions’ (ICS) Second Party Opinion (“SPO”) services provide issuers with an independent assessment of their Green, Social and Sustainability-linked financing frameworks. Those that meet ICS’ rigorous global standards give investors the security that the projects they fund are suitably sustainable.

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