AFME is pleased to circulate its European ESG Finance quarterly data report for the second quarter of 2021 (Q2 2021). The aim of this quarterly 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 2021 as well as a high-level regulatory and supervisory snapshot.

Key highlights:

• ESG bond and loan issuance marginally decelerated in Q2 2021 compared to Q1 2021. However, ESG fixed income issuance continues to display robust volumes- during Q2 2021, European ESG Bond and Loans issuance accumulated EUR 188.7 bn in proceeds, up 227% from EUR 83.1 bn in Q2 2020, with only a 3% drop from Q1 2021.
• ESG Bond issuance represented 17.7% of total European bond issuance during H1 2021.
• ESG securitisation issuance in H1 2021 reached EUR 5.2bn on four RMBS deals and one on-balance sheet ABS, a substantial increase from EUR 0.2bn issued in 2020FY.
• The European Commission on behalf of the EU issued EUR 14.1 bn in social bonds in May, consolidating as the largest social bond issuer in Europe.
• Carbon prices: The European Union Allowance (EuA) price per metric tonne stood at €53.3 in June 2021, a 110% increase from €25.3 in June 2020 and a 62.5% increase from €32.8 in December 2020. Most recently, at the end of August, EU carbon prices surpassed €60 per metric tonne.

There is significant dispersion in the price of pollution globally. The EU Emissions Trading System (ETS) had the highest allowance price globally, followed by the Switzerland ETS at €39.25, and the New Zealand ETS at €22.1 as of end Q2 2021. Contrastingly, the Regional Greenhouse Gas Initiative (USA)  has an allowance price of only €7.2.

• ESG Funds: Global ESG Funds continued to grow during Q2 2021 across all the major asset classes, with the exception of Money Market ESG Funds. Funds with an ESG mandate (including Mutual Funds and ETFs) totaled $4.36tn as of Q2 2021, a $200bn increase from $4.16tn in Q1 2021.

ESG equity funds continue to be by far the largest fund asset class, over 3x larger than fixed income funds.

• ESG price premia: Spreads of corporate ESG bonds against non-sustainable benchmarks have stabilized during Q2 2021. ESG premia has tightened from 9bps in April 2020 to 1bp on average during the months of April – July 2021.