Boom in auto sustainable bond market

Battery electric vehicles sales grew 75% year-on-year in the first half of 2022

One in five green, social and sustainability (GSS) bonds from the non-financial sector came from the auto industry in 2022, a report by MainStreet Partners has found, in a boom for electric vehicle funding.

The annual issuance of GSS bonds declined for the first year on record last year, at approximately $845bn, down from $1.05trn in 2021, according to the research.

However, GSS bonds issued by the auto industry represented an all-time high of 19% out of all bonds issued by non-financial corporates, up from 4% in 2020 and 7% in 2021.

Volkswagen, Ford and General Motors are just some of the large corporates that issued GSS bonds last year.

Electric cars ‘fastest growing’

Electric vehicle (EVs) and EV charging infrastructure were among the fastest growing, and most taxonomy-friendly, green activities, it found.

At the same time, battery electric vehicles sales grew 75% year-on-year in the first half of 2022, according to analysis by MainStreet Partners.

Charging infrastructure and onshoring of supply chains are already a priority for car manufactures issuing GSS Bonds, it added.

Max Roper, research analyst at MainStreet Partners, said the findings also pointed to a “pivotal role” for utilities in providing EVs’ charging infrastructure. 

He added: “Use of proceeds, such as the manufacture of EVs and batteries, are all covered by the European taxonomy, and based on our analysis, are prime candidates for upcoming green bond issuance.”

Looking more in general at the entire stock of green bonds, energy-related activities still dominate, the research found.

MainStreet Partners’s project level analysis showed green bonds are on average 70% aligned to the European taxonomy, 30% of which is thanks to renewable energy projects.

Roper said: “Funds that are seriously committed to invest in GSS bonds can leverage a robust taxonomy alignment to justify their sustainability credentials.

“Transparency and data is, and will continue to be, an essential feature of green bonds.”

According to Mainstreet Partners’ research, 37% of GSS funds are currently labelled as Article 8 under SFDR.