France retains top position in sustainable finance
France contributes to 18% of global sustainable bond issues in the first half (H1) of 2020, stated the findings of Key Performance Indicators of the Union for Capital Markets report by Association of Financial Markets in Europe (AFME).
However, global sustainable bond issuance declined due to record issuance of corporate and sovereign bonds. The proportion of EU27 sustainable-labelled bonds to total bond issuance dropped from 5.6% in 2019 to 4.3% in H1 2020. Within sustainable bond issuance, 27% of it was Covid-related social bonds, the largest proportion of the sustainable market in any half year to date.
Overall, Europe recorded unprecedented level of capital market financing, mainly fixed income securities. This has soared 44% year-on-year, resulting in an increase in EU corporate market financing from 11% in 2019 to 14.5%, according to the report. Small- and medium-enterprises (SMEs) continued to rely on bank lending, accounting for €573bn in H1 2020.
French SMEs are the second EU destination for venture capital investments
French small and medium-sized enterprises (SMEs) are the second largest European destination for venture capital investments behind the UK, with €3.6bn of business angels, venture capital, private equity and equity participation financing in the first half of 2020. However, this represents only 3% of total SME finance, while bank loans are consolidating their position as the main source of finance.
French non-financial companies significantly increased their market share of equity and government bond financing in the first half of 2020, with a 61% year-on-year increase on an annualised basis. France-headquartered firms recorded total market-financed equity and bond issuance volumes of €84.7bn in the first half of 2020.
If Europe is to rebound and ensure its global competitiveness, progress must be made in this area to strengthen its position in capital markets, said Adam Farkas, managing director of AFME. “More broadly, these results underline the need to act urgently to encourage the development of deep and liquid European capital markets, capable of meeting the needs of borrowers and savers and promoting long-term economic growth. This will require political support to rebalance companies and improve the functioning of securitisation, among other priorities,” said Farkas.