ESG Finance Report Q2 2022 - European Sustainable Finance | AFME

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Data Research
ESG Finance Report Q2 2022 - European Sustainable Finance
11 Aug 2022
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Author Julio Suarez Director
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AFME is pleased to circulate its European ESG Finance quarterly data report for the second quarter of 2022. The aim of this report is to provide detailed data and analysis on the rapidly growing Sustainable Finance market in Europe.

This Report contains up to date trends for the European Sustainable Finance market as at 30 June 2022, as well as a high-level regulatory and supervisory snapshot.

Key highlights:

  • ESG bond and loan issuance volumes in Q2’22 declined 20.7% year-on-year (YoY) but increased 16.5% quarter-on-quarter (QoQ).

    ESG bonds and loans include ESG-labelled bonds (proceeds-based), sustainable-linked bonds, transition bonds, green-linked loans and sustainable-linked loans.
    • ESG bond issuance, including ESG-labelled, sustainable-linked and transition bonds, represented 19.1% of total European bond issuance during H1'22 (19.5% in 2021FY and 14.1% in Q1’22).
    • Following a record Q1, the sustainable-linked bond market decelerated in Q2’22 with a decline in issued amount of 47% YoY and 59.3% QoQ, reversing its previous upward trend.
    • The ESG securitisation market has not continued the fast expansion observed in 2021, accumulating a total issued amount of €0.5bn in H1 2022.
    • ESG-labelled bond issuance continued resilient in Q2’22 with a 6% YoY increase, predominantly driven by the green bond segment which grew 47.9% YoY.
    • The sovereign sector led the green bond expansion. Market conditions may have prevented a more significant participation by the corporate sector, which declined 2% YoY in green bond issuance in Q2’22.
  • Carbon prices: the European Union Allowance (EuA) price per metric tonne finalised H1'22 at €88/Tn, from €80/Tn at the end of 2021. During the first months of Q3’22, EuA spot prices have fluctuated around €80/Tn.
    • EU and UK forward curves continue to anticipate long-term price increases.
  • Global ESG Funds decreased during Q2’22.
    • Funds with an ESG mandate (including Mutual Funds and ETFs) totalled $6.5tn as of Q2'22, a 16.7% decrease from Q1’22.
    • ​The quarterly decline was predominantly driven by valuation losses. Net outflows from ESG funds totalled $37.5bn in Q2’22 which represents less than 5% of the decline in the total amount of Global ESG funds.
  • ​​​ESG price premia: spreads of corporate ESG bonds against non-sustainable benchmarks have widened in Q2’22.
    • ESG premia, however, continues to fluctuate between 2 to 3 bps and has not reached the levels observed in 2020.
    • The greenium varies by issuer and by instrument, suggesting that in addition to the sustainability features, other technical factors such as liquidity may influence yield premia against conventional bonds.
  • ​​Regulatory update: We present a selective list of upcoming European initiatives for the year 2022.