Key takeaways
- At the LMA’s Sustainable Finance Conference in London on 9 November 2023 we saw that, despite a slowdown in ESG related loans, there is strong demand for ESG funds and ESG is a core factor for many consumers in their purchasing decisions.
- Increased ESG regulation would be welcomed and expected in the next three to five years.
- Blue financing is developing but is focused on emerging markets, as opposed to the focus of green financing on the European market.
Reed Smith attended the Loan Market Association’s (LMA) Sustainable Finance Conference in London on 9 November 2023. Below is a summary of our key takeaways and industry perspectives from the conference.
Let’s talk numbers
- Finance and sustainability go hand in hand. ESG loan volume has skyrocketed over the last several years. Since the London Stock Exchange Group (LSEG) started collecting data on ESG related loans in 2017, volumes have increased 15x.
- LSEG initially saw rapid growth in the asset class, peaking in 2021, but there has since been a significant slowdown. In 2022 this was due to geopolitical and macroeconomic factors, and much of this has continued into 2023.
- Global sustainable lending in Q3 2023 (US$216 billion) was down 35% YoY (Q3 2022 – US$333 billion). Sustainability-linked loans fell 65% YoY to the lowest quarterly total since Q3 2020. Despite this, ESG related loans have only declined proportionately to the general reduction in global loan issuance.