ESG bond issuance closed 2020 with an issued volume of more than $450 billion, representing growth of close to 50% over the previous year. This growth was largely supported by the issuance of social and sustainable bonds (46% of the ESG bond market), which grew almost fourfold, as issuers sought to support the health and economic recovery needed in the aftermath of the pandemic. In the first half of 2021, ESG bonds have taken on even greater relevance in the fixed income market, exceeding $1.5 trillion on the market and a volume issued to date that already exceeds the total volume issued at the end of 2020. In a year in which sustainable development must undoubtedly be part of political and economic decisions (COP26 and global economic recovery), issuers of green, social and sustainable bonds have not remained behind, and through these issuances, have contributed to the fight against climate change, whilst also committing to inclusive and sustainable growth.
Since September 2020, and throughout these months of 2021, the ESG bond market has incorporated a new type of sustainable bonds known as sustainability-linked bonds (SLBs), which, although they have been widely accepted worldwide, are particularly relevant in Latin America. Undoubtedly, the urgency of responding to the crisis has made it easier for social bonds and sustainability-linked bonds to gain relevance insofar as they make it possible to identify measurable impacts at the institution or project level. Thus, in Latin America we have seen how in the first six months of the year the volume issued in ESG bonds during 2020 has tripled (USD 4.1 billion in 2020 vs. USD 12 billion as of June 2021) with the sustainability-linked bond format being the most used (approximately 80% of the cases). It is worth remembering that the ESG bond market in the region was initially supported by sovereign issuers, followed by financial institutions. This very important surge of SLBs in countries such as Mexico or Brazil, however, is explained by the interest of private sector corporate issuers to better explain how ESG issues, such as climate change, social justice, transparency and human welfare, are key concerns that are considered in defining their corporate strategy. Through this type of bonds, continuous improvement is sought in key aspects that affect the way in which companies act and through environmental or social indicators, investors can annually monitor compliance with the ESG objectives set by each issuer in the short, medium and long term.