Sustainability-Linked Bond Watch Note: Q1 2021

12 April 2021

Dr Arthur KrebbersHead of Sustainable Finance, Corporates

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Pietro StimamiglioCorporate Financing & Risk Solutions, Sustainable Finance

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3 minute read

I. Key themes

  • Sustainability-linked debt issuance took off in Q1 and it has already surpassed 2020 levels – total supply €18.8billion eq. 
  • More industries are now considering linking their debt to their ESG targets – for example Supermarkets & Pharmacies, Food & Beverage, Transportation & Logistics and Retail
  • Further evidence of the interest for this type of structure moving down the credit spectrum – sub-investment grade names accounting for ca. 25% of the total supply in USD, EUR, and GBP
  • Setting Science-Based Targets can be an effective way to showcase the credentials of the company’s sustainability targets; however, it will not replace active and collaborative investor engagement
  • Environmental metrics – in particular GHG emissions (Scope 1, 2, 3) and renewables – remain the KPI of choice to this date

II. Supply dynamics

Supply (EUR, USD, GBP) 

Source: NatWest Markets

Split by Sector

Source: NatWest Markets

Split by Geography

Source: NatWest Markets

Split by Rating

Source: NatWest Markets

III. Structural features

Main KPI categories

*GHG emissions include Scope 1, 2, 3

Source: NatWest Markets

SPT driven adjustment to debt instrument

Source: NatWest Markets

% of emission targets that are SBTi linked

Source: NatWest Markets

Margin adjustment as a % of at-issue credit spread

Source: NatWest Markets

Target year as a % of overall tenor

Source: NatWest Markets

Sustainability-linked bonds

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