It’s also harder to do social bond frameworks and there is “even less consistency on key performance indicators and disclosure,” said Scott Freedman, a fund manager at Newton Investment Management, which oversees 105.4 billion pounds ($143 billion) of assets including ESG debt.
With firms’ ESG ambitions still a hot topic in 2022, the focus appears to be skewed more on the ‘E’ and ‘G’ parts, from cutting emissions to promoting women in management. Moody’s forecasts a steady increase in sustainability debt, which can fund both green and social projects, as borrowers start to think more holistically, said Matthew Kuchtyak, vice president of ESG outreach and research at Moody’s ESG Solutions.
“Social is here to stay as a point of importance,” Kuchtyak said in an interview. “It’s just that the dedicated social bond label is likely to see a modest decline in volumes this year.”
Issuance so far this year is supporting that view, amid an upturn in sales of sustainability-linked bonds, where borrowing costs are dependent on organization-wide ethical targets. Green bonds are also enjoying a revival, with year-to-date sales jumping 46% in Europe, and forecasts for exponential growth in the coming years.
“The issuer, and in my mind rightfully so, has thought about the fact that if they’re going to create a framework, let’s create one that’s going to be longer lasting, and give the flexibility to issue either green or social, based upon what they are seeing as an opportunity,” said Stephen Liberatore, head of ESG and Impact for Global Fixed Income at investment management firm Nuveen.
--With assistance from Greg Ritchie and Ayai Tomisawa.
This article was provided by Bloomberg News.