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The increased demand for ESG investments isn’t just changing the landscape of debt markets, it’s also driving product innovation.

Susan Barron, Head of Green and Sustainable Capital Markets, examines what’s behind the continued growth of ESG investing. She looks at the market’s current interest in ESG fixed income solutions, and considers the impact of the COVID-19 pandemic on investor demand for social and sustainable bonds. Looking forward, she also explores how increased issuance volumes are prompting new ways of structuring products.

Perspective 1: What’s driving the growth of ESG fixed income

As more investors and corporates have integrated ESG into their investment solutions and decisions, we've seen markets continue to grow. This year alone, we've seen the ESG bond markets grow by over 40 per cent.

Growth has been supported by policy makers, regulators and standardisation of ESG. We're also seeing companies and investors integrate green and social metrics which has helped to fuel the growth.

The appeal of ESG debt, and bonds in particular, is the versatility in structure, the opportunity to create targeted objectives and returns which are dependent on time horizons and outcomes.

Perspective 2: COVID-19 is driving social and sustainable issuance

The global pandemic has, and continues to create challenges in the debt markets, but COVID-19 has prompted significant growth in ESG debt issuance.

Market participants' awareness of social topics has increased as a result of the pandemic, particularly around community responses to the pandemic, digitisation, social inclusion and connectivity.

But it is not at the expense of the green bond market. The environmental agenda remains one of the key challenges of our time. Issuers and investors alike remain committed to using instruments such as green bonds to further the contribution to the green transition and green recovery.

Perspective 3: Innovation is increasing in ESG

As the demand for ESG bonds has grown, so too has the recognition that issuers may be at different stages of their own ESG journeys or face challenges from a sector and regional perspective that affect their ability to meet best market practice.

In order to address these issues, the market has encouraged product innovation, and we've seen some very interesting developments, which include COVID-19-related financing, sustainability linked bonds and climate transition finance.

We look forward to contributing to the future of the ESG debt market, including innovation and opportunities for issuers and investors alike.
 

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About the expert

Susan Barron is a Managing Director and Global Head of Green and Sustainable Capital Markets. She is responsible for the origination, structuring and execution of debt capital markets transactions across Green, Social and Sustainability for clients globally.

Within Banking, Susan was also Banking Business Lead for the European Referendum Response Programme, Head of Debt Capital Markets and Risk Solutions for CEEMEA (Central and Eastern Europe, Middle East and Africa) and worked in the Public Sector Debt Capital Markets team.

Susan joined Barclays in 2010. Previously, she worked on the Public Sector Debt Capital Markets Origination desk at Citi; and the Frequent Borrower and the EEMEA (Eastern Europe, Middle East and Africa) DCM desks at Dresdner Kleinwort.

Susan holds a Bachelor of Business Science (Honours) from the University of Cape Town.

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