Q2 2021

ESG Finance Report

European Sustainable Finance
Contents
Key Findings 3
Regulatory Update and Glossary 7
ESG Bond and Loan Issuance 11
ESG Bonds Outstanding 18
Carbon Pricing, Emissions and Trading 22
Fund Management 26
ESG Bond Trading 29
Valuations 32
Methodology and Definitions 37

Sustainable Finance Report – Q2 2021 2

 Key findings
1.1 European ESG Bond and Loan Issuance 2020-21
ESG bond and loan issuance marginally
decelerated in Q2 2021 compared to Q1
250
2021. However, ESG fixed income issuance
200 continues to display robust volumes driven
Bonds Loans by the active participation of the public
EUR (billion)

150
sector in the ESG bond market (EU and
100 country sovereigns) and continued increase
in ESG loan origination.
50

0
During Q2 2021, European ESG Bond and
Q1 Q2 Q3 Q4 Q1 Q2 Loans issuance accumulated EUR 188.7 bn
2020 2021 in proceeds, up 227% from EUR 83.1 bn in
1.2 European ESG Bond and Loan Issuance by Country H1 2021 Q2 2020, with only a 3% drop from Q1
2021.
France
EU
Germany In Q2 2021, the top issuers of ESG bonds
Italy
Spain and loans were located in France, Germany
United Kingdom
Netherlands
and Italy. The EU institutions (EU
Sweden
Norway
Commission on behalf of the EU and the
Belgium EIB) continued their leading market
Denmark *EU includes European Union and European
Finland Investment Bank (EIB) presence issuing a total of EUR 56.3bn in
Other
ESG bonds during Q2 2021 (predominantly
0 10 20 30 40 50 60 70 80 90 100
EUR (billion)
social bonds) [See graph 1.2].

Source: Dealogic
Sustainable Finance Report – Q2 2021 3
 Key findings ESG Bond issuance comprises Green, Social
and Sustainable bonds and totalled EUR 109
1.3 European Green Bond Issuance 2015-21 (Q2)
150 bn in Q2 2021, up 184% from the issuance of
59.3 bn in Q2 2020.

EUR (billion)
100

60.1% of ESG bonds were issued by the official

50
sector (predominantly government bonds), 35.5%
by corporates and 0.4% in ABS/RMBS.
0
2015 2016 2017 2018 2019 2020 2021
Q1 Q2 Q3 Q4 • Green Bond issuance increased 79% YoY, to
1.4 European Social Bond Issuance 2016-21 (Q2) EUR 60.1 bn in Q2 2021 from EUR 33.5 bn in
150 Q2 2020.
EUR (billion)

100 • Social Bond issuance increased by 74% to

EUR 33.5 bn in Q2 2021 from EUR 19.2 bn in
50 Q2 2020.

0 By Q2 2021, the EU had issued a total of 89.6

2016 2017 2018 2019 2020 2021
bn in social bonds under the SURE scheme.
Q1 Q2 Q3 Q4

1.5 European Sustainable Bond Issuance 2015-21 (Q2) • Sustainable Bond issuance increased by 138%
30.0 to EUR 15.6 bn in Q2 2021 from EUR 6.5 bn in
Q2 2020.
EUR (billion)

20.0

10.0 ESG securitisation issuance in H1 2021 reached

EUR 5.2bn on two social RMBS deals, two green
0.0 RMBS deals, and an on-balance sheet ABS. This
2015 2016 2017 2018 2019 2020 2021
represents a substantial increase from EUR 0.2 bn
Q1 Q2 Q3 Q4 issued in 2020FY.
Source: Dealogic
Sustainable Finance Report – Q2 2021 4
 Key findings

1.6 European ESG & Green Linked Loan Issuance 2017-21 (Q2)

ESG and Green Linked Loans increased by

160
191% to EUR 78.6 bn in Q2 2021 from EUR
140
27 bn in Q2 2020.
120

100
The majority of ESG & Green linked loan
EUR (billion)

issuance in the Syndicated Loans Market in

80
Q2 2021 were social loans, which
60
represented 67.4% of the total Q2 2021 loan
40 origination, compared to 32.5% of green
20 loans.
0
2017 2018 2019 2020 2021

Q1 Q2 Q3 Q4

Source: Dealogic
Sustainable Finance Report – Q2 2021 5
 Key findings
As of June 2021, ESG Bond issuance
1.7 European ESG Bond Issuance as % of Total Bond Issuance
represented 17.7% of total European bond
10%
issuance during 2021, up 8.8% from 8.9% in
2020FY. This is comprised of 8.8% green
8%
bonds, 7.1% Social Bonds, and 1.8%
6%
Sustainability Bonds [See Chart 1.7]
4%
The top 3 issuing countries and supranationals
2%
account for 60.2% of the total ESG Bond
0%
2015 2016 2017 2018 2019 2020 2021 (H1) issuance in Q2 2021 with the EU institutions
Green Social Sustainable issuing 21.4%, France 26% and Germany
1.8 European ESG & Green Linked Loan Issuance as % of Syndicated Loan 12.8% of total issuance.
Origination 30%
In Q2 2021, ESG & Green Linked Loan
25%
Issuance equals 25.9% of total European Loan
20% Issuance [See Chart 1.8], up 12.2% from 13.7%
15%
in 2020.

10% The top 3 Issuing countries make 47.2% of total

ESG and Green Linked Loans issuance in Q2
5%
*ESG includes Environmental, Social and Sustainable
2021, with France issuing 19%, Italy 15.58%
0% and Spain 12.53 % of total issuance.
2015 2016 2017 2018 2019 2020 2021 (H1)

Source: Dealogic
Sustainable Finance Report – Q2 2021 6
Regulatory Update

Sustainable Finance Report – Q2 2021 7

2021 Regulatory/Supervisory Snapshot – Sustainable Finance
▪ IPSF announces workstream on a “common ground taxonomy” and “comparison of ESG disclosure frameworks”
▪ Self-assessment based on ECB guide on supervisory expectations for climate and environmental risks begins
Q1 ▪ EU Commission places first EU SURE bond for 2021
▪ EBA launches a consultation on integration of ESG risks into Pillar III disclosures (due on 1 June)
▪ ESAs launch a consultation on RTS on taxonomy-related disclosure for Art 8 and 9 products of SFDR (due 12 May)
▪ EU Platform publishes a report with recommendations to EC on Transition Finance

▪ EC adopts first Taxonomy DA (climate change adaptation/mitigation)

▪ EC amends DAs on sustainability preferences, fiduciary duties and product governance (UCITS, AIFMD, MIFID II, IDD, Solvency II)
Q2 ▪ EC publishes proposal for CSRD (revising current NFRD)
▪ BoE publishes Climate Biennial Exploratory Scenario
▪ EBA publishes final report on integration of ESG in risk management and supervision
▪ FCA launches consultation on extension of TCFD-aligned climate-related disclosures

▪ EC to adopt SFDR RTS (Art. 8 & 9, PAI)

▪ EU Platform publishes reports on criteria for rest of env. objectives, social objectives and on harmful and low impact criteria
▪ EC launches CBAM/EU-ETS proposals (June)
▪ EC launches Renewed Sustainable Finance Strategy and publishes EU Green Bond Standard proposal
▪ EC adopts DA on Art. 8 disclosures under Taxonomy Regulation
▪ ESAs to develop draft RTS on content, methodologies, presentation of sustainability indicators for securitisation disclosure
▪ BCBS to consult on integration of climate risks in Basel Framework
Q3
▪ EC to launch proposal on ESAP
▪ EBA to publish final draft ITS on Pillar III disclosures (Q3-Q4)
▪ IPSF to publish reports on Common Ground Taxonomy Report and Report on sustainability related disclosure
▪ IOSCO launches a consultation on ESG ratings and data providers
▪ EC to publish Sustainable Corporate Governance proposal
▪ EBA to publish report on sustainable securitisation framework
Q4 ▪ EBA to publish results of 2020 pilot climate sensitivity analysis
▪ IFRS Foundation to announce details of creation of Sustainability Standards Board
▪ EU Platform to publish Report on review of Taxonomy Regulation and Report on minimum social safeguards 8
▪ EC to adopt Taxonomy DAs for remaining environmental objectives (likely to drift into 2022) Sustainable Finance Report – Q2 2021
2022 Regulatory/Supervisory Snapshot – Sustainable Finance (Cont.)

▪ EC JRC to publish final criteria for Ecolabel

Q1 ▪ ECB to conduct supervisory review of bank practices, based on 2021 self-assessment
▪ ECB to conduct supervisory stress-test on climate-related risk

Q2 ▪ Commission to publish draft review of the Shareholder Rights Directive II

▪ EU Platform to publish a report on the application of Taxonomy Regulation

Q3 ▪ EU Platform to publish a report on updating criteria for all six environmental objectives

Q4 ▪ EC to adopt 1st set of sustainability reporting standards under CSRD

2023-2025

2022-2024
▪ EBA to launch Discussion Paper on prudential treatment of assets from a sustainability perspective
▪ EBA to publish Guidelines on ESG integration in risk management and supervision

Q4 2023 ▪ EC to adopt 2nd set of sustainability reporting standards under CSRD

▪ EBA to publish final report on prudential treatment of prudential treatment of assets from a sustainability perspective
2025
▪ HMT deadline for mandatory TCFD-aligned disclosures across the economy

Sustainable Finance Report – Q2 2021 9

 Glossary of Regulatory Abbreviations

BoE: Bank of England

CBAM: Carbon Border Adjustment Mechanism
CSRD: Corporate Sustainability Reporting Directive
DA(s): Delegated Acts
EC: European Commission
ECB: European Central Banks
ESAP: European Single Access Point
EU Platform: European Platform on Sustainable Finance
EU-ETS: EU Emissions Trading System
IPSF: International Platform on Sustainable Finance
ITS: Implementing Technical Standards
JRC: European Commission Joint Research Centre
NFRD: EU Non-Financial Reporting Directive
PAI: Principal Adverse Impact
RTS: Regulatory Technical Standards
SFDR: Sustainable Finance Disclosures Regulation

Sustainable Finance Report – Q2 2021 10

ESG Bond and Loan Issuance

Sustainable Finance Report – Q2 2021 11

 ESG Bond and Loan
ESG bond supply has averaged EUR
Issuance 41.6 bn per month during 2021 (as of
2.1 Monthly European ESG Bond Issuance: 2021YtD
H1), a large increase from the average
80 monthly supply observed in 2020FY
70
60
(EUR 21.04 bn) and in H1 2020 (EUR
EUR (billion)

50 14.6 bn).
40
30
20
The month of March saw the highest
10 ESG issuance in 2021, followed by the
0
Jan Feb Mar Apr May Jun issuance in May, which was the highest in
Green Social Sustainability
Q2, driven by a significant increase in
2.2 Monthly European ESG and Green Linked Loan Issuance: 2021YtD
social bond issuance, predominantly by
35
the European Union, which issued EUR
30
14.13 bn in social bonds in May.
25
EUR (billion)

20 Monthly ESG loan issuance has almost

15 consistently increased throughout the
10
year, with a small drop of EUR 4.8 bn
5
from May to June.
0
Jan Feb Mar Apr May Jun

Source: Dealogic
Sustainable Finance Report – Q2 2021 12
 Green Bond Issuance
2.3 European Green Bond Issuance by Deal Type: H1 2021 2.4 European Green Bond Issuance by Country: H1 2021

Germany
Corporate Bond-Investment-Grade
France
Sovereign, Local Authority
Italy
Non-US Agency
Netherlands
Corporate Bond-High Yield Sweden
Supranational Spain
Covered Bond United Kingdom
Medium-Term Note Norway
EU European Union includes European
Mortgage-Backed Security
Finland
Investment Bank (EIB)
Short-term Debt
Other
0 20 40 60 80
EUR (billion) 0 5 10 15 20 25 30
EUR (billion)
2.5 European Green Bond issuance by Currency: H1 2021 2.6 European Green Bond Issuance Global Comparison: H1 2021

120

100

EUR (billion)
80

60

40

20

0
UK Rest of Europe North America Asia EU

Source: Dealogic
Sustainable Finance Report – Q2 2021 13
 Social Bond Issuance
2.7 European Social Bond Issuance by Deal type: H1 2021 2.8 European Social Bond Issuance by Country: H1 2021
EU
Supranational France
Non-US Agency Germany
United Kingdom
Corporate Bond-Investment-Grade Spain
Covered Bond Sweden
Italy
Corporate Bond-High Yield Netherlands
Belgium EU includes European Commission and European
Sovereign, Local Authority
Austria Investment Bank (EIB)
Medium-Term Note Russian Federation

0 20 40 60 0 10 20 30 40 50 60
EUR (billion) EUR (billion)
2.9 European Social Bond Issuance by Currency: H1 2021 2.10 European Social Bond Issuance Global Comparison: H1 2021
120

Euro
100

US Dollar 80

EUR (billion)
British Pound Sterling 60

Australian Dollar 40

Swedish Krona 20

0 20 40 60 80 100 0
EUR (billion) Rest of Europe Asia UK North America EU

Source: Dealogic
Sustainable Finance Report – Q2 2021 14
 Sustainable Bond Issuance
Proceeds of Sustainable Bonds are allocated between green projects and social projects.

2.11 European Sustainable Bond Issuance by Country: H1 2021 2.12 European Sustainable Bond Issuance by Currency: H1 2021

5
4.5 Euro
4
3.5 British Pound Sterling
EUR (billion)

3
2.5 US Dollar
2
1.5 Swedish Krona
1
0.5 Australian Dollar
0

EU
Austria

Turkey

France
Italy

Netherlands

Germany

Spain

Kingdom
Slovenia
Andorra
Sweden

Swiss Franc

United
0 2 4 6 8 10 12 14
EUR (billion)
2.13 European Sustainable Bond Issuance by Deal Type: H1 2021 2.14 European Sustainable Bond Issuance Global Comparison: H1 2021

Corporate Bond-Investment-Grade 40

Sovereign, Local Authority 35

30

EUR (billion)
Non-US Agency 25

Corporate Bond-High Yield 20

15
Supranational 10
Medium-Term Note 5
0
0 2 4 6 8 10 UK Rest of Europe North America Asia EU
EUR (billion)

Source: Dealogic
Sustainable Finance Report – Q2 2021 15
 ESG Securitisation Issuance
2.15 European ESG Securitisation Issuance by Asset Class H1 2021 2.16 European ESG Securitisation Issuance by Country H1 2021
6
ABCP 6
CMBS
5 RMBS France Netherlands Portugal
5
On balance sheet ABS UK Italy
4
EUR (billion)

EUR (billion)
3
3
2
2
1
1

0
0
2016 2017 2018 2019 2020 H1 2021
2016 2017 2018 2019 2020 H1 2021

2.17 European Social Securitisation Issuance by Asset Class H1 2021 2.18 European Green Securitisation Issuance by Asset Class H1 2021
3.5
3 ABCP
CMBS
CMBS RMBS 3
RMBS
2.5 On balance sheet ABS
2.5

EUR (billion)
2
EUR (billion)

1.5 1.5

1 1

0.5
0.5
0
0 2016 2017 2018 2019 2020 H1 2021
2020 H1 2021
Source: Climate Bond Initiative, Credit Agricole, S&P, and European Data Warehouse
Sustainable Finance Report – Q2 2021 16
*The data by country correspond to the location of the bank originator
 ESG Linked and Green Loan Issuance
2.18 European ESG linked and Green Loan Issuance by Deal Type: H1 2021 2.19 European ESG linked and Green Loan Issuance by Country: H1 2021

35
30
25

EUR (billion)
20
15
10
5
0

2.20 European ESG linked and Green Loan Issuance by Currency: H1 2021 2.21 European ESG linked and Green Loan Issuance Global Comparison: H1 2021

120

100

80

EUR (billion)
60

40

20

0
Asia Rest of Europe UK North America EU
Source: Dealogic
Sustainable Finance Report – Q2 2021 17
ESG Bonds Outstanding

Sustainable Finance Report – Q2 2021 18

 Green Bonds Outstanding
3.1 Evolution of European Green Bonds Outstanding: H1 2021
3.2 European Green Bonds outstanding by Country: H1 2021
France
Germany
Netherlands
Sweden
European Union
Spain
United Kingdom
Italy
Norway
Finland
Denmark European Union includes European Investment
Belgium
Luxembourg
Bank (EIB)
Ireland
Other

0 50 EUR billion 100 150

3.3 European Outstanding Amount by Currency: H1 2021 3.4 European Outstanding Amount by Coupon Type: H1 2021

Source: Refinitiv - Eikon

Sustainable Finance Report – Q2 2021 19
 Green Bonds Outstanding
3.5 European Outstanding Amount by Bond Grade: H1 2021 3.6 European Outstanding Amount by Years to Maturity: H1 2021
600
250
500
200
400
EUR (billion)

EUR (billion)
150
300
100
200

50
100

0
0
<5 years 5 - 7 years 8 - 10 years 10+ years
NA/NR High Yield Investment Grade

3.7 European Outstanding Amount by Asset Class: H1 2021 3.8 European Outstanding by Top 5 Issuers: H1 2021

400 45
40
350
35
300

EUR (billion)
30
EUR (billion)

250 25
200 20
15
150
10
100 5
50 0
Germany, Federal Societe du Grand Paris KfW European Investment France, Republic of
0
Republic of Bank (Government)
Corporate Govt/Treasury/Central Bank Non-US Munis (Government)

Source: Refinitiv - Eikon

Sustainable Finance Report – Q2 2021 20
 Social Bonds Outstanding
3.9 Evolution of European Bonds Outstanding: H1 2021 3.10 European Outstanding Amount by Country: H1 2021
European Union
France
Netherlands
United Kingdom
Spain
Germany
Italy
Belgium
Finland
Austria European Union includes European Commission and European
Investment Bank (EIB)
Other

0 20 40 60 80 100

3.11 European Outstanding Amount by Security Type: H1 2021 3.12 European Outstanding Amount Issuer Economic Sector Type: H1 2021

Source: Refinitiv - Eikon

Sustainable Finance Report – Q2 2021 21
Carbon pricing, emissions and trading

Sustainable Finance Report – Q2 2021 22

 Carbon Market Prices
4.1 Comparison of Global ETS Allowance Prices
Average of China's 8 Pilot ETS European Union California
New Zealand Québec South Korea
Switzerland RGGI
60 The European Union Allowance (EuA)
*China’s ETS average includes Shenzen,Shanghai,Beijing,Guangong,Tianjin,Hubei,Chongqing,Fujian
50 price per metric tonne stood at €53.3 in
40 June 2021, a 110% increase from €25.3
in June 2020 and a 62.5% increase from
EUR

30

20
€32.8 in December 2020.
10 The EU ETS has the highest allowance
0 price globally. The second highest ETS
Jun-08

Jun-09

Jun-10

Jun-11

Jun-12

Jun-13

Jun-14

Jun-15

Jun-16

Jun-17

Jun-18

Jun-19

Jun-20

Jun-21
allowance price is the Switzerland ETS at
€39.25 (March data), followed by New
4.2 Forward curve: European Union Allowance (EUA) and UK Zealand at €24.1. Contrastingly, the
Electronic Energy Future Chain Contract
64
Regional Greenhouse Gas Initiative
50
63 (USA) has an allowance price of only
49.5
49 UK 62
61 EU €7.2.
EUR/UNITS
GBP/TONNE

48.5
60 We must note that prices are not directly
59
48 58
comparable across systems and vary
47.5 57 greatly, given different circumstances and
47
56 differences in ETS design.
55
46.5 54
Apr-22

Apr-23

Apr-24

Apr-25

Apr-26

Apr-27
Aug-21
Dec-21

Aug-22
Dec-22

Aug-23
Dec-23

Aug-24
Dec-24

Aug-25
Dec-25

Aug-26
Dec-26

Aug-27
Dec-27
Jun-22

Jun-23
Dec-21

Apr-22

Aug-22

Dec-22

Apr-23

Aug-23

Dec-23
Feb-22

Feb-23
Oct-22

Oct-23

Source: ICAP, Refinitiv

Sustainable Finance Report – Q2 2021 23
Market curves observed August 2021
 Measurement of Carbon In 2021, China has overtaken the EU as the
largest emissions trading scheme globally was
Emissions implemented with 3996.9 Mt Co2-eq covered.

4.3 Amount of Emissions Covered by ETS (MtC02e) The European Union Emissions Trading
System (EU ETS) is now the second largest
China national ETS greenhouse gas ETS globally, with 1725.7 Mt
EU ETS CO2-eq covered.
Korea ETS
Germany ETS The third largest ETS globally is the Korea ETS,
Mexico pilot ETS with 513.4 Mt CO2-eq covered.
UK ETS
EU+UK verified emissions have been
Kazakhstan ETS
approximately twice as high as freely allocated
Canada federal OBPS
New Zealand ETS
allowances each year since 2013, with the most
Switzerland ETS
recent data showing verified emissions to have
been 49% higher than freely allocated allowances
0 500 1000 1500 2000 2500 3000 3500 4000 4500
in 2020.
4.4 EU + UK Allowance Vs verified Emissions

Freely traded allowances: Companies receive

or buy emissions and can trade them with one
another. The total number of allowances is limited,
which ensures that they have a value. At the
beginning of each trading period, most
installations (companies) receive a percentage of
their allowances for free. This proportion
decreases gradually each year.

Source: The World Bank, European Environment Agency

Sustainable Finance Report – Q2 2021 24
 Carbon Pricing – The EU ETS involves a cap being set on the total

Allowance & Tax amount of certain greenhouse gases that can be

emitted by companies covered by the system. The
4.5 Allowances auctioned or sold (EUAs and EUAAs)
EUA: European Union Allowance. EUAA: European Union Aviation Allowance cap is reduced over time so that total emissions fall.
2500
Within the cap, companies receive or buy emission
2000
allowances, which they can trade as needed. The
Mt CO2-eq

1500 limit on the total number of allowances available

ensures that they have a value.
1000

500 Every year a company must surrender enough

allowances to cover all its emissions. If a company
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 reduces its emissions, it can keep the spare
allowances to cover its future needs or sell them to
4.6 Carbon Tax by Country
Sweden
another company that is short of allowances.
Switzerland
Liechtenstein
Total allocated allowances (EUA and EUAA) has
Finland decreased from 1304.82 Mt CO2-eq in 2019 to
Norway
652.24 Mt CO2-eq in 2020.
France
Luxembourg
Ireland Carbon Tax is another method of carbon pricing.
Netherlands Sweden currently has the highest carbon tax
Iceland
Canada
globally at 137.2 USD/tCO2e. The country with
0 20 40 60 80 100 120 140 160
second highest carbon tax is Switzerland, 27%
USD / tCO2e lower than Sweden, at 101.4 USD/tCO2e.
Source: European Environment Agency, The World Bank
Sustainable Finance Report – Q2 2021 25
Fund Management

Sustainable Finance Report – Q2 2021 26

 Global ESG funds
7.1 Global ESG Funds by Asset Class (USD tn)
Mutual Funds (including Fund of Funds) and Exchange Traded Funds
Global ESG Funds continued to grow
5 during Q2 2021 across all the major asset
Alternatives Bond classes, with the exception of Money
4.5 Commodity Equity Market ESG Funds.
4
Mixed Assets Money Market
Other Real Estate Funds with an ESG mandate (including
3.5
Mutual Funds and ETFs) totaled $4.36tn
as of Q2 2021, a $200bn increase from
3 $4.16tn in Q1 2021 and a $1.3tn increase
from $3tn in Q2 2020.
2.5
ESG equity funds continue to be by far
2 the largest fund asset class with 57% of
1.5
total ESG funds and over 3x larger than
fixed income which represents 17% of the
1 total.
0.5

Source: Lipper, Eikon

Sustainable Finance Report – Q2 2021 27
 Global ESG Funds
7.2 Global ESG Funds by currency base (USD tn) 7.3 Global ESG Funds by geographical location (USD tn)

USD
EUR
SEK Europe
GBP
CHF
AUD
NOK Americas
DKK
JPY
CNY
Other Europe APAC
Other
0 0.5 1 1.5 2
0 0.5 1 1.5 2

7.4 Global ESG fund flows ($bn) 7.5 European ESG fund flows ($bn)
250
180
160
200
140
150 120
100
100 80
60
50 40
20
0 0
-20
-50 -40
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Q1 2021
Q2 2021

Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Q1 2021
Q2 2021
Source: Lipper
Sustainable Finance Report – Q2 2021 28
ESG Bond Trading

Sustainable Finance Report – Q2 2021 29

 ESG Bond Trading Volumes
6.1 European ESG Bond Average Daily Trading Volumes 6.2 Average Daily Trading Volumes: European ESG
(all issuers) Corporate Bonds
1.4 0.5
1.2 0.4

EUR (billion)
EUR (billion) 1 0.3
0.8
0.2
0.6
0.1
0.4
0
0.2

Jan

Nov

Jan

Nov

Jan
Sep

Sep
Mar

May

Jul

Mar

May

Jul

Mar

May

Jul
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2019 2020 2021

2019 2020 2021 Corporate

6.3 Average Daily Trading Volumes: European ESG 6.4 Average Daily Trading Volumes: European ESG ABS
Government, Agency, Supranational, and Sovereign Bonds and Covered Bonds
1
0.05
0.8
0.04
EUR (billion)

EUR (billion)
0.6
0.03
0.4 0.02
0.2 0.01
0 0
Jan

Sep

Sep

Sep

Sep
Nov
Jan

Nov
Jan

Jan

Nov

Jan

Nov

Jan
Mar
May

Mar
May

Mar
May

Mar

May

Mar

May

Mar

May
Jul

Jul

Jul

Jul

Jul

Jul
2019 2020 2021 2019 2020 2021

Government, Agency, Supranational, Sovereign ABS & Covered Bonds

Source: Trax data from MarketAxess

Sustainable Finance Report – Q2 2021 30
 ESG Bond Turnover Ratios
6.5 European ESG Bond Turnover Ratio (all issuers) 6.6 Turnover Ratio: European ESG Corporate Bonds
0.16%
0.30%
0.14%
0.25%
0.12%
0.20% 0.10%

0.15% 0.08%

0.06%
0.10%
0.04%
0.05%
0.02%
0.00%
0.00%
Feb

Feb

Sep

Feb
Jan

Mar
Apr
May

Sep
Aug

Jan

Mar
Apr
May

Aug

Jan

Mar
Apr
May
Nov

Nov
Jul

Jul

Jul
Jun

Oct

Dec

Jun

Oct

Dec

Jun

Feb
Mar

Sep

Feb
Apr

Mar

Sep

Feb
Apr
Jan

May

Aug

Jan

May

Aug

Mar
Apr
Jan

May
Nov

Nov
Jun
Jul

Dec

Jun
Jul

Dec

Jun
Jul
Oct

Oct
2019 2020 2021
2019 2020 2021

6.7 Turnover Ratio: European ESG Government, Agency,

Supranational, and Sovereign bonds
0.50%
0.45%
0.40%
0.35%
0.30%
0.25%
0.20%
0.15%
0.10%
0.05%
0.00% * Turnover Ratio has been calculated by dividing the outstanding amount by the average daily trading volume
Jan
Feb
Mar
Apr
May

Sep

Jan
Feb

Jan
Feb
Aug

Nov

Mar
Apr
May

Sep
Aug

Nov

Mar
Apr
May
Jun
Jul

Oct

Dec

Jun
Jul

Oct

Dec

Jun
Jul
** Methodology used to calculate bonds outstanding has changed since the last quarter and has thus
resulted in a change in turnover ratios –A constant outstanding amount is used during the calendar year to
calculate turnover ratio
2019 2020 2021
Source:Trax data from MarketAxess
Sustainable Finance Report – Q2 2021 31
Valuations

Sustainable Finance Report – Q2 2021 32

 ESG premia
7.1 Spreads (OAS) of EUR-denominated corporate ESG bonds against
non-ESG corporate benchmarks (bps)

Aug-20

Dec-20
Dec-20
Jan-20
Jan-20

Apr-20

Jun-20

Jun-21
Sep-20
Oct-20
Oct-20

Jan-21

Apr-21
Apr-21
May-20
May-20

Nov-20

May-21
Feb-20
Mar-20
Mar-20

Jul-20
Jul-20

Feb-21
Feb-21
Mar-21

Jul-21
Jul-21
-1
Spreads of corporate ESG bonds against
-2
non-sustainable benchmarks have
stabilized during Q2 2021.
-3
ESG premia has tightened from 9bps in
-4 April 2020 to 1bp on average during the
months of April – July 2021.
-5

-6

-7

-8 Negative spreads represent an ESG premium

-9

-10

Source: AFME with Barclays and Bloomberg data. INDEX_OAS_TSY

* Spread between EUR-denominated ESG and Green corporate bonds and PanEuro corporate bonds Sustainable Finance Report – Q2 2021 33
ESG Bond Spreads
7.2 ESG EUR Corporate spreads (bps)
94
92
90
88
86
84
82
80
78
76
74
Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21

7.3 ESG EUR corporate spreads by credit rating (bps)

180
160
140
120
100
80
60
40
20
AAA CCC
0
Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21
Source: Barclays and Bloomberg. INDEX_OAS_TSY
Sustainable Finance Report – Q2 2021 34
 Green Bond Spreads
7.4 Green bond spreads by currency (bps) 7.5 EUR Corporate green bond spread (bps)
80 94
92
70
90
60 88
50 86
84
40
82
30 80

20 78
76
10 JPY EUR USD 74
0 72
Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21

7.6 Global Green bond spreads by credit rating (bps)

120

100

80

60

40
Aaa Baa
20

0
Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21

Source: Barclays and Bloomberg. INDEX_OAS_TSY

Sustainable Finance Report – Q2 2021 35
 ESG Equity Indices
7.11 MSCI Europe ESG Net Index EUR* and EUR STOXX 600 7.12 STOXX Global ESG Environmental Leaders (1 Jan 2021 =100)
(1 Jan 2021=100)
120
120
115
115

110 110

105
105
100
100
95
STOXX Global ESG Environmental Leaders index offers a representation of the
STOXX EUROPE 600 MSCI EUROPE ESG Index 95
90 leading global companies in terms of environmental criteria, based on ESG
indicators provided by Sustainalytics.
85 90
Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21

7.13 STOXX Global ESG Governance Leaders (1 Jan 2021 =100) 7.14 STOXX Global ESG Social Leaders (1 Jan 2021=100)
125
125
120
120
115
115
110
110
105

100 105

95 100
The STOXX Global ESG Governance Leaders index offers a representation of the The STOXX Global ESG Social Leaders index offers a representation of the leading
90 global leading companies in terms of governance criteria, based on ESG 95 global companies in terms of social criteria, based on ESG indicators provided by
indicators provided by Sustainalytics Sustainalytics.
85 90
Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21

Source: Eikon, STOXX, MSCI

Sustainable Finance Report – Q2 2021 36
*The MSCI Europe ESG Leaders Index is a capitalization weighted index that provides exposure to companies with high ESG performance relative to their sector peers.
MSCI Europe ESG Leaders Index consists of large and mid cap companies in 15 developed markets countries
 Methodology and Definitions
Green Bonds: Green bonds fund projects that have positive environmental and/or climate benefits. The majority of the green bonds issued are green “use of proceeds” or asset-linked
bonds. Proceeds from these bonds are earmarked for green projects but are backed by the issuer’s entire balance sheet. There are also green "use of proceeds" revenue bonds, green
project bonds and green securitised bonds. The Green Bond Principles (GBP) are voluntary process guidelines that recommend transparency and disclosure and promote integrity in the
development of the Green Bond market by clarifying the approach for issuance of a Green Bond.

Carbon Pricing: Carbon pricing is an instrument that captures the external costs of greenhouse gas (GHG) emissions—the costs of emissions that the public pays for, such as damage to
crops, health care costs from heat waves and droughts, and loss of property from flooding and sea level rise—and ties them to their sources through a price, usually in the form of a price on
the carbon dioxide (CO2) emitted. Carbon pricing can take the form of a carbon tax or fee, or a cap-and-trade system that depends on government allotments or permits.

ESG: ESG stands for Environmental Social and Governance. It refers to the three key factors when measuring the sustainability and ethical impact of an investment in a business or
company.

ETS: Emissions trading system is a market-based approach to controlling pollution by providing economic incentives for reducing the emissions of pollutants. The EU emissions trading
system (EU ETS) is a cornerstone of the European Union's policy to combat climate change and its key tool for reducing industrial greenhouse gas emissions cost-effectively.

EUA: A European Union allowance (EUA) is the official name for Europe’s emission allowances, which in 2008 was defined as the official Kyoto allowance for countries in the EU.
One EUA entitles the holder to emit one ton of carbon dioxide or carbon-equivalent greenhouse gas.

Europe: Countries included: Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia,
Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Switzerland, United Kingdom.

Social Bonds: Proceeds of Social bonds are used to raise funds for new and existing projects that tackle a specific social issue and/or seek to achieve positive social outcomes. The
reference framework for issuance of Social Bonds is the Social Bond Principles (SBP). The SBP promote integrity in the Social Bond market through guidelines that recommend transparency,
disclosure and reporting Social objectives may include (but are not limited to): affordable housing, affordable basic infrastructure, employment generation and sustainable food systems.

SRI: Socially responsible investing or SRI, is a strategy that emphasizes not only the financial gains from an investment but also ethical or social change.

Sustainable Bonds: Proceeds of Sustainable Bonds are split between green projects and social projects.

Sustainable Finance Report – Q2 2021

37
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Intern, Capital Markets Research Oliver Moullin
Mihai.Mereuta@afme.eu Managing Director, Sustainable Finance
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