15 August 2019, source edie newsroom

Europe’s sustainable finance market experienced “rapid” growth during the first half of 2019, despite a challenging end to 2018, new analyses have concluded this week.

H2 of 2018 was widely regarded as a difficult period for green finance, but the market is showing signs of resurgence

H2 of 2018 was widely regarded as a difficult period for green finance, but the market is showing signs of resurgence

The first of these analyses comes from Bloomberg New Energy Finance’s (BNEF) Sustainable Finance Market Outlook for the second half of 2019. According to this report, Europe accounted for almost half (48%) of global sustainable debt insurance between January and July this year, with growth driven by both the corporate and government sectors.

Indeed, BNEF is predicting that at least $380bn of sustainable debt finance will be provided during 2019, after a record H1.

“The sustainable debt finance market is growing in volume, scope and popularity,” BNEF’s analysis states. “Record volumes of sustainable debt came to market in 1H 2019 – and the first half of the year is typically quieter than the second.”

Elsewhere, BNEF is predicting a continued comeback for the green bond market – particularly in Europe and the US – after green bond issuance fell 18% during the last quarter of 2018.

The green bonds market grew by a staggering 78% between 2016 and 2017, with national and institutional investors funnelling more than $150bn into low-carbon projects – but then experienced a quieter 2018. BNEF puts the resurgence of the market down to a “shift in market focus towards sustainability-linked loans”.

“Markets are scaling up and diversifying geographically, and in terms of sectors and bond asset classes,” BNEF’s Outlook states.

Further analysis

This week has also seen financial services firm Morningstar release its own research on green finance, which concluded that sustainable funds pulled record levels of investment during the first half of the year.

The research looked at 2,323 open-end funds domiciled in Europe, all of which met Morningstar’s own criteria for Environmental, Social and Governance (ESG) investments. It found that H1 of 2019 saw a collective total of €36.9bn invested in these funds, up from €38bn during the whole of 2018.

Morningstar also considered the performance of the funds in its research, concluding that more than one-third (34.1%) ended July 2019 within the top quartile of performance for their respective sector. In comparison, just 14.8% were in the bottom quartile.

Newest (green) loan on the block

In related news, BNP Paribas has issued a new sustainability-linked loan to housing association The Peabody Trust this week.

The interest rate on the £75m revolving credit facility is linked to Peabody achieving social-impact-based results. Specifically, the organisation will have to deliver an agreed number of accredited childcare qualifications to local residents over a five-year period, to benefit from lower interest rates. The hope is that this will improve the local community by boosting skills and employment rates, while providing care for children.

BNP Paribas claims that the loan is the first to be issued within the UK housing association sector with embedded links to social purpose.