Transition to a net-zero carbon economy: How insurers contribute to green finance via sustainable bonds

The sustainable bond market recorded another tremendous year of growth in 2021, with € 960 bn of bonds issued. This represents an increase of 80% vs 2020(1). This strong market expansion is being driven by institutional investors, for whom combating climate change and seeking positive social impacts have become strategic challenges. Among them, insurers have a key role to play, both in terms of assets and liabilities. More and more European players are making public commitments to the transition towards a net-zero carbon economy by 2050. And sustainable bonds, while they are just one lever among many others, appear to be particularly well-suited tools to help insurers – as issuers and investors – in their sustainable journey and in the alignment of their ESG strategy with their corporate social responsibility (CSR) policy:

  • An opportunity to highlight sustainable credentials
  • Financing projects related to energy and ecological transition and schemes addressing societal challenges
  • Benefitting from relatively better pricing, particularly for subordinated instruments
  • An answer to regulatory pressure for insurers/reinsurers to increase the share of sustainable assets within their balance sheets.

Until now, insurers/reinsurers have mainly issued green bonds, in a subordinated debt format. And they follow the global sustainable bonds’ market trend as they are expected to issue more and more social bonds, sustainable bonds (environmental and social projects) and sustainability-linked bonds (coupon linked to the achievement of ESG objectives), which are booming.

(1) Source : « sell-side » research, « Initiative pour les obligations climatiques », Environmental Finance, Natixis, OSTRUM AM.

Transition to a net-zero carbon economy

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  • Nathalie Beauvir-Rodes

    Nathalie Beauvir-Rodes

    Senior analyst on sustainable bonds