Top Underwriter of Green Bonds HSBC Eyes $1 Trillion Market

(Bloomberg) -- More first-time issuers are likely to tap financing markets for environmentally and socially responsible debt in the next year or so, bringing the total outstanding amount of such bonds to about $1 trillion by the first half of 2021, according to HSBC Holdings Plc.

“We’re still discovering new clients that have not issued in a sustainable format,” said Jean-Marc Mercier, global co-head of debt capital markets at HSBC, the biggest underwriter of the bonds this year, in an interview in Tokyo. The “internal wiring” of the borrower is transformed in selling such debt, he said.

Issuance of green, social and sustainable bonds has risen more than 70% this year to about $208 billion, with borrowers such as PepsiCo Inc. and Poland helping push the amount outstanding from corporates and governments to around $640 billion, data compiled by Bloomberg show. Total sales of all such notes issued stand at more than $870 billion, according to data compiled by BNEF.

Green issuance remains a small part of the more than $100-trillion global bond market. From an issuer’s perspective, selling green or sustainable securities means the borrower can probably access investors that haven’t bought its debt before, said HSBC’s Mercier.

For Pacific Investment Management Co., the market needs to broaden away from just green notes toward more funding that addresses environmental, social and governance needs, according to Ketish Pothalingam, a portfolio manager there.

Companies working toward such deals are probably strongly focused on a sustainable business plan, making them more attractive, Pothalingam said at a green bond conference last week in Tokyo.

“That means we’re more likely to look at that issuer, rather than an issuer that just brings a green bond,” he said. It’s probably the “next iteration” of the market.

The Reference Shelf

• A QuickTake on sustainable investing.
• How to use Bloomberg’s green loan principles table.
• Bloomberg NEF analysis of external reviews for green bond.
• For Bloomberg NEF’s sustainable debt tool.
• Expectations for China’s green debt market.
• A royal visit led the Seychelles to invent a new bond.

--With assistance from Tom Freke.

To contact the reporter on this story: Beth Thomas in Tokyo at bthomas1@bloomberg.net

To contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, Finbarr Flynn, Ken McCallum

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