Europe Trounces U.S., Asia in Race to Turn Capital Markets Green

This content was published on July 15, 2021 - 09:13

(Bloomberg) -- Ethical ambitions are becoming the centerpiece of European credit markets, making the region the undisputed world leader in sustainable financing.

One dollar out of every $5 raised this year by European issuers has been linked to borrowers’ performance in Environmental, social and governance (ESG) initiatives. That ratio increases to one out of $3 for corporate loans. Those shares in overall loans are several times higher than the proportions for the Americas and Asia-Pacific.

The distinctive lead for European borrowers comes at a time when the post-pandemic recovery is driving a new investment cycle, while investors insist more than ever on ethical commitments encouraged by the European Union’s calls for sustainable financing. The region’s issuers have raised more than 100 billion euros ($123 billion) of sustainability-linked loans (SLL) in 2021, setting a record year in just six months.

ESG borrowing is increasing outside Europe too, but at a much slower pace. In the Americas, SLL borrowing has accounted for only 5% and in Asia, it’s 3%.

Europe’s leadership extends to the bond market as well, accounting for more than half of global sustainability-linked bond sales which have surged to $72 billion so far this year, 4.5 times 2020’s full-year sales. Meanwhile, the share of ESG debt in the region’s bond market has reached almost a quarter of all issuance.

Here are three charts showing how ESG is taking over European lending:

Investment Grade

European high-grade companies were the first to push out such loans in 2017 and saw record sales every year until the pandemic interrupted. Sustainability borrowing has rebounded this year, with record deals of 69 billion euros in the first-half of the year that boosted SLL’s share of the total tally to an unprecedented 31%. That’s double the ratio in the Americas and 10 times the figure for Asia.

High Yield

Junk-rated companies are in no mood to be left behind. They are quickly adopting the SLL structure even in leveraged-buyout financing. Leveraged loans in Europe with terms tied to borrowers’ ESG targets soared to 29 billion euros this year, which was almost 10 times 2020’s full-year issuance and accounting for a quarter of total sales. The U.S., meanwhile, saw $9 billion of SLL in the leveraged loan space, which was three times of previous annual issuance.

Read more: Ethical Lending Sweeps Into Europe’s Leveraged Loan Market

German Debt

Even in the private German Schuldschein market where annual sales averaged 25 billion euros before the pandemic, the sustainability-linked structure has taken hold, making up almost a quarter of this year’s issuance.

Read more: Europe’s Rush for ESG Debt Takes Off in German Market


European credit investors will focus on the latest central bank policy headlines and their impact on the shape of the economic recovery from the pandemic, as the new bond pipeline thins ahead of summer holidays.

  • In the U.K., Bank of England Deputy Governor Dave Ramsden said inflation may peak at double the targeted level, indicating monetary policy might need tightening
  • Italian mobility solutions provider Leasys SpA and Spain’s Lar Espana Real Estate SOCIMI SA are offering green bonds in euros
  • Bulgarian Energy Holding EAD is also raising a euro issue


Asia’s primary dollar bond market saw at least seven companies offering new debt that prominently features notes used to finance a combination of green and social projects.

  • India’s Adani Electricity Mumbai Ltd. is marketing a $300 million sustainability-linked bond with terms tied to renewable energy and greenhouse gas emission targets
  • China’s Kaisa Group Holdings Ltd., Agile Group Holdings Ltd. and Minmetals Land Ltd. are looking to sell sustainability notes


Goldman Sachs Group Inc. became the first of the big six U.S. banks to sell bonds after reporting earnings, bringing a two-part deal for $5.5 billion on Wednesday.

  • Payment services company MoneyGram International Inc. sold a $415 million deal where proceeds, along with a leveraged loan, be used for refinancing
  • Insurance product and services company AmWINS Group Inc. cut the size of its high-yield offering in favor of a larger leveraged loan

©2021 Bloomberg L.P.

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