A closer look: Sustainable bond supply in the first half of 2020

Nordea’s Sustainable Finance Advisory team digs into supply trends in the sustainable bond market in the first half of 2020 and what they could mean going forward.

Expectations were high at the start of 2020. Given the sustainable bond market’s impressive growth in 2019, with supply levels 50% higher compared to 2018, many expected the strong momentum to carry into this year. Now, with the pandemic outbreak and financial market standstill in hindsight, we take a look at supply levels in the first six months of 2020 as well as the pandemic’s multifaceted effect on the sustainable bond market.

Global sustainable bond supply: H1 2020

The impressive momentum of 2019 continued into H1 2020, with the total supply of sustainable bonds (green, social and sustainability bonds) reaching USD 172bn, an increase of 19% compared to H1 2019 levels. Despite (or thanks to) the pandemic, the overall sustainable bond supply has been supported by the increased number of social bonds issued to fund initiatives to combat the coronavirus and its negative effects.

Europe is the largest regional market for sustainable bonds, with 57% market share. It has, together with the Americas, increased its relative share of sustainable bond supply compared to FY2019. This was mainly due to the increased issuance of social bonds in response to the coronavirus crisis.

Charts showing supply of sustainable bonds by geographic location

SSA (Sovereigns, Supranationals and Agencies) is the sector group that supplied the market with the highest amount of social (mostly corona-related) bonds. The strong overall supply in H1 can be derived from SSA supply, which constitutes almost 40% of total sustainable supply during H1.

Charts showing sustainable bond supply by issuer type

Global sustainable bond supply increased during the first half of 2020, but the split between the green, social and sustainability formats was strongly affected by the ongoing pandemic. The green bond supply landed slightly above USD 100bn for the first half of 2020, a decrease of about 15% from H1 2019 figures. The green bond format has decreased in relative share, while the social bond format share has ballooned. This confirms the impressive flexibility in the sustainable bond market and that issuers and investors allocate funding to what’s currently the most pressing issue.

Nordic sustainable bond supply: H1 2020

Zooming in on the Nordic countries, H1 offered a relatively larger supply from Norway and Sweden compared to previous years.  Sweden is still the most evolved sustainable bond market in the Nordics, with almost 60% of Nordic supply, and is in many aspects mirroring global supply trends. In Sweden, corporates are driving the higher supply this year, followed by SSAs and lastly FIG (Financial Institutions Group). While Norway continues to grow, both Finland and Denmark are lagging behind.

Chart showing sustainable bond supply for Finland, Norway and Denmark
Chart showing supply per Nordic country by issuer type

The supply in SEK has previously been dominated by Swedish issuers, but during the first half of 2020, domestic supply of sustainable SEK bonds fell below 50%. This is due to the increased share of SSAs, which are treated as international and not Swedish issuers,  providing sustainable bond supply to the market.

Chart showing SEK supply breakdown

The rise of social bonds

When looking at H1 2020 supply, one has to consider the pandemic and its effects on the green, social and sustainability supplies. As mentioned above, social bonds really gained traction when entities started to issue corona bonds in response to the pandemic. Breaking down social bond supply, corona bonds made up almost all social bond supply in June this year. Already in February, the share of corona bonds was as high as 86% of total social bond supply. In the past, the social bond market has been a bit hesitant, and the modest supply in previous periods has allowed the corona bonds’ relative share to shoot up dramatically. Even so, the social bond supply has increased from USDbn 24 in February to USDbn 118 in June, an increase of almost 5 times.

Chart showing supply of pandemic and social bonds

~ 60% of total pandemic bond supply is courtesy of just five issuers

Issuer Supply, USDbn eqv Timing % of total
China government bond 102 June 32%
Italy government bond 31 April and June 10%
Spain government bond 24 April 8%
World Bank 17 April and May 5%
UNEDIC ASSEO 11 May and June 3%

The sustainable bond supply impressively managed to increase in H1 2020 compared to H1 2019 figures. Last year, the green format stood for around 80% of the sustainable bond market supply, which can be compared to the allocation between green, social and sustainability now at 60%, 25% and 15% respectively.

The rise of social bonds to mitigate the pandemic’s effects has established the format as a relevant complement to the dominant green bond format, and we expect social bonds to be utilised more broadly during the next half-year and beyond.

We also expect to see an increased supply of green bonds in the coming six months from issuers that have been reluctant due to the pandemic-influenced financial market. The anticipated continued social bond issuance as well as a pick-up in green bond supply paves the way for a record sustainable bond market during the remaining months of 2020.

About the authors:

Ebba Ramel, an analyst in Nordea's Sustainable Bonds team


Ebba Ramel is an analyst in Nordea’s Sustainable Bonds team.



Jacob Michaelsen, Head of Nordea Sustainable Finance Advisory


Jacob Michaelsen is Head of Sustainable Finance Advisory at Nordea.

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