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Research Announcement:

Moody's - Coronavirus shrinks green bond issuance while spurring social bonds

 The document has been translated in other languages

05 May 2020

New York, May 05, 2020 --

  • Moody's now forecasts sustainable bond issuance of as much as $325 billion this year, down from a previous forecast of $400 billion
  • As part of the total, a combined $100 billion forecast for social and sustainability bonds is unchanged amid coronavirus response efforts

Moody's has lowered its forecast for global sustainable bond issuance this year after economic fallout from the coronavirus outbreak reduced green bond volumes in the first quarter, even as social bond issuance rose to a record, Moody's Investors Service said in a report published today.

"We now expect green bond volumes of $175-225 billion this year, down from our original $300 billion forecast," said Matthew Kuchtyak, AVP-Analyst at Moody's. "However, we maintain our combined $100 billion forecast for social and sustainability bonds, given the heightened market focus on coronavirus response efforts."

Total sustainable bond issuance fell to $59.3 billion in the first quarter of 2020, down 32% from the previous quarter, as green bond volumes declined 49% to $33.9 billion. Still, social bond issuance reached $11.9 billion, more than double the previous quarterly record, while sustainability bonds registered a strong $13.4 billion total. The surge in social and sustainability bonds has been primarily led by multilateral development banks, which have increasingly turned to these instruments to finance their coronavirus response efforts.

"Greater emphasis on social finance and sustainable development will likely be one of the lasting outcomes of the coronavirus crisis," said Kuchtyak.

There was an increase in liquidity borrowings in the first quarter by investment-grade companies seeking to fortify balance sheets in anticipation of an economic slowdown. This was especially evident in the last two weeks of March when a surge of borrowing contributed to an all-time monthly record for new bond issuance from US investment-grade companies. Such borrowings are often brought to market quickly with proceeds not tied to specific projects, two characteristics that potentially explain the drop in use-of-proceeds sustainable bonds.

Moody's continues to see a number of factors supporting growth in sustainable bonds over the long run. These include strong investor demand, heightened governmental focus on climate change and sustainable development, gradual greening of the financial system, and increased issuer focus on highlighting sustainability plans to stakeholders.

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Matthew Kuchtyak
AVP-Analyst
Environmental, Social & Governance
Moody's Investors Service, Inc.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Andrew Davison
Senior Vice President
Environmental, Social & Governance
Moody's Investors Service Ltd.
JOURNALISTS : 44 20 7772 5456
Client Service : 44 20 7772 5454

Releasing Office :
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

© 2020 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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