Money flood, not inexperienced desires, behind stoop in oil bond gross sales

LONDON: Banks earned report first-quarter charges from arranging inexperienced bond offers, whereas oil, gasoline and coal firms issued the bottom quantity of debt in a decade.

However all is not because it appears. The stoop in fossil-fuel issuance is not essentially an indication bankers have woken as much as the seriousness of local weather change. As an alternative, it displays the truth that power firms have not needed to faucet the bond markets for money given the surge in commodity costs.

With oil above US$100 (RM422) a barrel and prone to keep there for the foreseeable future, “the time of borrowing to pay dividends and purchase again shares is over,” mentioned Fernando Valle, a senior oil and gasoline analyst at Bloomberg Intelligence.

Fossil-fuel firms raised US$37.6bil (RM158.5bil) promoting bonds within the first three months of the 12 months, down from US$79.4bil (RM335bil) in the identical year-earlier interval when crude costs have been nearer to US$61 (RM257) a barrel, information compiled by Bloomberg present. Crude markets have been so sturdy that “oil firms have little have to problem bonds as they’ve a lot money and free money movement,” mentioned Paul Vickers, a senior credit score analyst at Bloomberg Intelligence.

“In actual fact, they’ve been redeeming bonds in money reasonably than changing them with new ones, and even shopping for some bonds again early.”

Collectively, BP Plc, Chevron Corp. and Shell Plc repurchased about US$10bil (RM42bil) of bonds forward of schedule prior to now 12 months, he mentioned.

Valero Vitality Corp and Phillips 66 are doing the identical, and Exxon Mobil Corp is dedicated to lowering its debt, Valle mentioned.

Nonetheless, it stays true that inexperienced bonds, and inexperienced bond charges, are on the upswing. Traditionally, banks have made rather more cash offering underwriting providers and lengthening loans to the fossil-fuel trade than they’ve organized green-related bonds and loans. That began to vary final 12 months.

The query stays, nonetheless, about simply how dedicated banks are to net-zero emissions pledges. The world’s main local weather finance specialists and economists warned this week that an excessive amount of cash continues to pour into fossil fuels and too little is channeled to wash power, placing the planet on monitor to blow previous its restrict to keep away from catastrophic world warming.

Led by JPMorgan Chase & Co, BNP Paribas SA and Financial institution of America Corp, bankers earned about US$695mil (RM2.9bil) within the first quarter issuing inexperienced bonds, up from nearer to US$140mil (RM590mil) as just lately as 5 years in the past, Bloomberg information confirmed.

Against this, they pocketed about US$319mil (RM1.35bil) promoting fossil-fuel bonds, down from the roughly US$638mil (RM2.6bil) earned within the first three months of final 12 months.

Corporations, governments and different organizations have raised greater than US$116bil (RM489bil) promoting inexperienced bonds to date in 2022 after issuing about US$515bil (RM2.17 trillion) throughout all of final 12 months. The primary-quarter enhance occurred throughout a interval when the Bloomberg Barclays US Inexperienced Bond Index – which tracks company inexperienced bonds – misplaced 6.95%.“The rising want for renewable power sources and different environmental tasks makes the inexperienced bond market ripe for continued development, having already doubled between 2020 and 2021,” mentioned Mallory Rutigliano, an analyst at BloombergNEF, who tracks inexperienced and sustainable finance.

On the similar time, banks are underneath strain to decarbonise their portfolios and set inner insurance policies to exit coal and different pollutive actions, and so they might resolve to tackle extra inexperienced devices to fulfill their climate-financing pledges, she mentioned. — Bloomberg


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