Environmental Finance's Bond Awards 2022

Lead manager of the year - US muni social bonds and US muni sustainability bonds: Morgan Stanley

Morgan Stanley underwrote the most municipal bonds out of all the US banks in both the sustainability and social categories during 2021.

The New York-based firm brought to market 11 municipal bond transactions bearing sustainability or social labels, raising a total of $1.5 billion.

The bank won two awards for its efforts. It cornered one fifth of the US municipal market in sustainability debt, and 9% in social municipal debt.

Morgan Stanley worked with a variety of sustainability bond issuers including affordable housing projects and museums.

The bank highlighted its role as lead manager in the Massachusetts Clean Water Trust's $209.5 million inaugural sustainability bond for water quality projects for disadvantaged communities.

At Morgan Stanley's suggestion, the trust mapped its transaction to six UN Sustainable Development Goals (SDGs).

The transaction attracted a 1.5x oversubscribed order book. The bank said investors noted that the trust's ESG disclosure in its offering document set a new "gold standard" for the municipal market.

In social bonds, Morgan Stanley worked with a mix of affordable housing and non-profit issuers to address socioeconomic issues across the US.

It led a $238.5 million inaugural social bond from the Knowledge is Power Programme. The programme runs 16 free public charter schools in the New York boroughs of the Bronx, Brooklyn and Manhattan, supporting the education of over 6,000 students.

The bonds were issued to finance educational facilities in New York for a student population of which 90% qualified for free or reduced-price lunches and 18% had special education needs.

The transaction – which mapped to three SDGs – attracted a 13.5x oversubscribed order book, enabling the bank to tighten spreads by up to 20 basis points.
Zachary Solomon, head of tax-exempt project finance and sustainable infrastructure, says: "Morgan Stanley's continued leadership in this market is driven by a deep commitment to our clients' desires to integrate ESG thinking into its capital markets offerings and products.

"The social and sustainability bond labels represented the fastest growing labels in the municipal bond market in 2021, reflecting increasing issuer interest in conveying the social impacts of their projects to capital market participants," Solomon says.

"In this light, 2021 saw continued diversification and innovation within the municipal ESG bond market as well as meaningful improvement in overall disclosure quality and external review."

The bank has led over 140 transactions in municipal bonds across all ESG categories since 2013.