LatAm green bond Q1 issuance holds up thanks to Chile - Moody's

LatAm green bond Q1 issuance holds up thanks to Chile - Moody's

Bonds Debt Capital Markets Corporate & Sovereign Strategy Fixed Income Chile Latin America Coronavirus

Latin America's total green bond issuance in the first quarter of 2020 was nearly equal to the whole of last year, underpinned by a massive issuance from Chile in January, prior to the impact of the coronavirus pandemic that is blamed for an overall global drop in the first three months of the year, a new report showed on Tuesday.

Moody's Investor's Service reported green bond issuance in the first quarter of the year at $4.3 billion, down from the $4.7 billion issued during the whole of 2019 in the region. This was primarily driven by Chile's $3.82 billion dollar issuance that was made up of $1.65 billion in US dollar-denominated paper and €1.96 billion ($2.17 billion) worth of debt.

"Increased issuance in Latin America somewhat offset declines in Chinese green bond volumes as Chile's large sovereign green bond helped support EM issuance," Moody's said.

Overall, the pandemic caused green bond volumes to drop to $33.9 billion, off 37% compared to the first quarter of 2019 and down a sharp 49% compared to the fourth quarter of last year.

However, the firm said there was record quarterly social bond issuance and steady sustainability bond issuance that "somewhat mitigated the decline" in green bond issuance.

"We now anticipate green bond volumes totaling $175-225 billion, down from our original $300 billion forecast," Moody's said. It also said its original forecast for $400 billion worth of issuance in sustainable bond issuance for the year was no longer within reach. 

An increased focus on fighting the pandemic was behind $11.9 billion in social bond issuance, more than double the previous quarterly record. Globally there was $13.4 billion in sustainability bonds issued.

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

Moody's highlighted overall emerging market sustainable bond issuance for the quarter totaled $7.7 billion in the first quarter, a drop to its lowest level since the first quarter of 2018. 

  

Green bonds finance new and/or existing projects such as renewable energy, energy efficiency, clean transportation, sustainable water management and green buildings.

"Despite economic challenges associated with the coronavirus in the coming months, we continue to see strong potential for sustainable bond growth throughout EM economies over the long run given their susceptibility to ESG risks and huge investment needs to finance sustainable development," Moody's said.

Moody's citing data from Dealogic and the Climate Bonds Initiative said global green, social, and sustainability bonds issuance was a combined $59.3 billion in the first quarter, down 14% from a year ago and off 32% from the previous quarter, due to the economic and financial fallout of the coronavirus.