Liquidity in credit markets is getting greener: S&P

Singapore, Aug 3 : Liquidity is steadily increasing across sustainable debt markets with a 40 per cent year-over-year increase in sustainable debt issuance expected in 2021 and interest growing in lower-rated credit sectors, S&P Global Ratings has said.
Given the surging interest in environmental, social and governance (ESG) factors, a report by S&P Global explores liquidity and pricing within sustainable debt markets.
"Liquidity is growing as issuers and investors alike seek to deliver upon their ESG goals and objectives, and this should bode well for the future growth and stability of sustainable debt markets," said S&P Global Ratings Sector Lead Patrick Drury Byrne.
According to the report, there are some signs that sustainable bonds may be pricing at a premium in certain sectors, although it is difficult to isolate the impact of ESG factors.
"Improved standardisation within sustainable debt markets could bolster liquidity further," said Byrne. "However, issuers that cannot satisfy investors' ESG thresholds may in time face higher financing costs and lower liquidity."
The report also discusses the path to greener monetary policy. Greening monetary policy operations might not be an easy task but options exist, and their implementation could accelerate the development of green liquidity, especially in the corporate bond space.