Net-zero drives opportunity, investment

But it will require investment worth many trillions of dollars, according to some estimates.

“Every bond issuer and loan borrower benefits from having a well-articulated sustainability strategy.” – Nancy Wang

The response from global financial markets to catalyse the transition with investment capital has been momentous. Issuance of green, social, sustainable and sustainability linked (GSSS) bonds and loans has surged, driven by insatiable demand from investors and lenders.

Global issuance of sustainable finance debt in the first half of 2021 rose to $US824 billion, surpassing 2020’s full-year issuance of $US760 billion, according to data from Bloomberg. The total global sustainable finance debt market now exceeds $US3.1 trillion, the data show.

Demand from investors and lenders for GSSS product is “growing exponentially,” according to Nancy Wang, ANZ’s Director of Sustainable Finance in Hong Kong.

Moreover, the importance of sustainability and climate change risk is now spilling out into the non-labelled GSSS market or “vanilla” issuance market, she said.

“Every bond issuer and loan borrower benefits from having a well-articulated sustainability strategy, even if they are issuing a vanilla loan or bond,” Wang said.

Global disclosure and reporting regimes have expanded with the establishment of the Taskforce on Nature-related Disclosures (TNFD) in June. TNFD is a new global market-led initiative which aims to provide financial institutions and corporates with a complete picture of their environmental risks and opportunities. ANZ is among more than 100 organisations to join the TNFD Forum.

The TNFD is aiming to publish a risk management and disclosure framework for organisations to report and act on evolving nature-related tasks in 2023, building on the success of the Task Force on Climate-related Financial Disclosures (TCFD).

These global initiatives to improve disclosure and transparency will help address the issue of greenwashing and scepticism in the investor market about the authenticity and commitment of companies and governments towards net zero.

The International Monetary Fund also flagged this risk in its latest Global Stability Report in October.

“One of the biggest issues financial institutions face as underwriters, bookrunners and issuers of Green, Social and Sustainable debt instruments are questions around greenwashing,” Mara Chiorean, ANZ’s Director – Sustainable Finance in Singapore said.

“The role of a sustainability coordinator is work with our customers to come up with ambitious sustainability targets, ensuring sustainable finance transactions are based on best practice and can withstand scrutiny.”

Sharon Klyne is Associate Director for Institutional Insights at ANZ

This article was originally published on ANZ’s Institutional Insights website. The ANZ Finance & Treasury Forum will return for its fourth year in 2021, to be held virtually across two days on October 20 and 21.

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