Lloyds Bank predicts increased issuance of responsible bonds

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Lloyds Bank has predicted that the issuance of environmental, social and governance (ESG) bonds will continue to grow, after seeing huge demand for its own green bond.

According to the Financial Times, Lloyds’ ESG bond raised over £250 million, but could have raised considerably more based on initial demand. The money will be used to support small-scale renewable energy projects and healthcare providers based in the UK.

Speaking to the FT, James Garvey, head of capital markets at Lloyds, said, “There has been a growing demand for investors to be seen as socially responsible I think we will see a lot more issuance.”

ESG bonds work in the same way that traditional bonds do, paying out regular payments with interest over a defined period of time. However, responsible bonds will focus on areas that benefit ESG issues, such as clean energy, reversing environmental degradation or providing services to vulnerable areas and families.

A number of other organisations have predicted that the green bond market will grow rapidly, as both investors and corporates see the benefits of incorporating ESG issues into their portfolios and operations. Ratings agency Standard & Poor’s has estimated that over this year, the issuance of corporate green bonds will double, reaching $20 billion (£12bn).

Investment bank HSBC also made a similar prediction at the beginning of this year. The bank said the issuance of green bonds was being driven by the capital needs of issuers as well as the commitment of institutional investors to climate finance and responsible investment, adding that it expected the market to reach $25 billion (£15bn) this year.

Photo: Elliott Brown via Flickr  

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Further reading:

US firm launches $100m green bonds for low-carbon investment

S&P: corporate green bond market to double reaching $20bn

Zuirch backs responsible investment and doubles green bond commitment

Barclays launches Green Bond Index to meet ‘growing demand’

Campaigners call for clarity in Green Bond Principles