Goldman Sachs predicts American ESG bond market slowdown (2023)
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Goldman Sachs argued recently that the American ESG bond market could be slowing down this year. A slowdown in ESG bond issuance would mark yet another point of divergence between the ESG market in the United States and that in Europe:
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Companies based in the U.S. are on track to halve the amount of ESG-labeled debt they issue this year, marking a clear departure from the trend on the other side of the Atlantic, according to an analysis by Goldman Sachs Group Inc. The U.S. slump reflects the different regulatory set-ups in the two regions, said Goldman analysts including Michael Puempel and Sienna Mori. In Europe, rules have driven the supply of debt that incorporates environmental, social and governance goals. In the U.S., meanwhile, utility and energy sectors, as well as the financial firms backing them, have retreated from the ESG bond market. This year is likely to see just $40 billion of ESG corporate investment-grade issuance in the U.S. dollar market, according to the Goldman analysts. That’s half the amount issued by U.S. companies last year, and just 40% of the level reached in 2021, they said. The slump means that ESG-related issuance only accounts for 3% of total dollar-denominated supply in the investment-grade market, Goldman estimates. That’s “sharply down” from levels seen in previous years, when the relative share was double that, Puempel and Mori said. Adding an ESG label to a bond is unlikely to improve its performance, according to the Goldman analysts. That said, there’s also no observable underperformance associated with labeling a bond ESG, they noted. The findings fit broadly with an analysis by the European Securities and Markets Authority published Friday. … In Europe, companies’ investment-grade ESG issuance has “held up better,” the Goldman analysts said, with the overall level of supply on track to reach €140 billion ($147 billion) this year. Globally, ESG fixed-income funds have continued to attract client flows, with the 5.5% increase over the period beating the 3.6% seen among their non-ESG equivalents, Goldman said.[1] |
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See also
- Environmental, social, and corporate governance (ESG)
- Economy and Society: Ballotpedia's ESG newsletter
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Footnotes
- ↑ Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
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