Environmental Finance's Bond Awards 2021

External assessment provider of the year: Sustainalytics

In 2020,  Sustainalytics  passed a milestone of delivering 500 second-party opinions  (SPOs) to issuers in over 60 countries since the launch of its opinion services in 2014. 200 of these were issued in 2020.

According to Environmental Finance's bond database, it is also retained the title of the largest SPO provider in 2020.

In 2020,  Sustainalytics  says it grew its Sustainable Finance Solutions team from 32 to 66 sustainable finance professionals to support rapidly growing client demand.

It made the following developments in 2020 to help keep pace with the rapidly evolving market:

  • EU Taxonomy:  After undertaking a mapping of the EU taxonomy of sustainable activities and comparing it with Sustainalytics' own use of proceeds taxonomy, the company began offering clients an assessment of the degree of alignment of their frameworks with the 'Technical Screening' and the 'Do No Significant Harm' criteria of the EU Taxonomy.
  • Transition Finance:  Sustainalytics  launched a methodology for transition bonds, to help issuers in heavier-emitting industries, such as steel, natural gas and shipping, access financing for projects focused on decarbonisation and transitioning to a low-carbon economy.
  • Covid-19:   At the onset of the pandemic,  Sustainalytics expanded its internal taxonomy to identify potential uses of bond proceeds related to Covid-19, identifying two main categories: healthcare and socio-economic impact mitigation. It provided SPOs to a number of issuers targeting the direct and indirect impacts of the pandemic, including Pfizer and JP Morgan.
  • Sustainability-linked bonds:   Following ICMA's release of the Sustainability-Linked Bond Principles,  Sustainalytics developed a framework to assess the credibility of Sustainability Performance Targets and KPIs in relation to the sustainability commitment of the issuer. It delivered six assessments of SLBs in 2020 to clients including Novartis, Tesco and Acciona.

One of the awards judges said Sustainalytics' SPOs provide "good transparency", adding that "at times they provide more detailed information than what was given to investors during calls".

The deals it worked on in 2020 include:

Novartis AG:  Swiss pharmaceutical company Novartis issued a €1.85 billion ($2.2 billion) sustainability-linked bond (SLB) in September 2020. It is the first SLB to incorporate social targets which include increasing patient reach in low- and middle-income countries (LMICs) by at least 200% by 2025, in addition to increasing patient reach of its global health flagship programs in leprosy, malaria, Chagas disease and sickle cell disease, by at least 50% over the same period. The company committed to raising the coupon by 0.25%, from the first payment in 2026 should it fail to reach its targets.

Ford Foundation:  In June 2020, the Ford Foundation issued bonds worth $1 billion as the first non-profit foundation to offer a labelled social bond in the US taxable corporate bond market. The proceeds raised under the bond will be directed towards building resilience in the non-profit sector and strengthening key non-profit organisations working towards reducing inequality so that they are in a position to advance just, inclusive, and equitable recovery efforts following the Covid-19 pandemic.

Grand Duchy of Luxembourg:  In September 2020, the Grand Duchy of Luxembourg issued a €1.5 billion ($1.8 billion) sustainability bond addressing multiple green and social use of proceeds categories. In addition to assessing the framework's alignment with the Green and Social Bond Principles, Sustainalytics provided a detailed assessment of the alignment of its green use of proceeds categories with the 'Technical Screening' criteria, and the 'Do No Significant Harm' criteria set under the EU Taxonomy.

Alphabet Inc:  In August 2020, Alphabet issued a $5.75 billion sustainability bond targeting multiple use of proceeds categories including circular economy, racial equity, and employment generation. Alphabet's issuance is the largest green, social or sustainability bond ever issued by a corporate. Issued in three tranches of $1 billion, $2.25 billion and $2.5 billion, the bond will have coupon rates of 0.45% (2025 maturity), 1.1% (2030 maturity), 2.05% (2050 maturity).