Companies based in the US are on track to halve the amount of ESG-labelled 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.
The US slump reflects the different regulatory set-ups in the two regions, with Europe more supportive of debt that incorporates environmental, social and governance goals, said Goldman analysts including Michael Puempel and Sienna Mori.
The development follows more than a year of political attacks against ESG in the US, with high-profile Republicans such as Florida governor and presidential hopeful Ron DeSantis seeking to vilify the investment strategy as “woke” and anti-American.
Combined with the fallout of an energy crisis that’s driven up fuel costs and led big oil to walk back green transition plans, issuing green bonds in the US has become a fraught business.
Meanwhile bonds of all stripes – whether they have got an ESG label or not – are feeling the fallout of continually rising interest rates. This week, the US 30-year Treasury yield rose above 5 per cent for the first time since 2007, sending reverberations across equity and debt markets.
This year is likely to see just $40 billion of ESG corporate investment-grade issuance in the US dollar market, according to the Goldman analysts. That’s half the amount issued by US companies last year, and just 40 per cent of the level reached in 2021, they said.
The slump means that ESG-related issuance only accounts for 3 per cent of total dollar-denominated supply in the investment-grade market, Goldman estimated.
That’s “sharply down” from levels seen in previous years, when the relative share was double that, the analysts said.
Goldman notes that much of the drop-off in US ESG issuance can be traced back to a lack of supply from the utility and energy sectors, as well as the financial firms backing them.
What’s more, 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 labelling a bond ESG, they noted.
The findings fit broadly with an analysis by the European Securities and Markets Authority published on Friday, with ESMA noting that it “cannot confirm a systematic pricing benefit for any ESG-labelled debt type as of March 2023. However, issuers of ESG bonds did benefit from a statistically significant pricing in the past driven by their issuer-level ESG credentials”.
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 per cent increase over the period beating the 3.6 per cent seen among their non-ESG equivalents, Goldman said.
“In our view, these inflows are growing evidence that this investment style continues to gain traction as investors look for potential ways to play the energy transition theme as well as invest according to other potential ESG-related objectives,” analysts said.
The Goldman analysis matches the picture painted by data from Morningstar Direct, which shows that despite the political headwinds, more ESG funds are being launched than liquidated.
Globally, 90 ESG funds were closed so far this year, while 253 were opened. Even in the US, 25 more ESG funds were created than were shuttered, according to the data.
UAE currency: the story behind the money in your pockets
Heather, the Totality
Matthew Weiner,
Canongate
The specs
Engine: 4.0-litre V8 twin-turbocharged and three electric motors
Power: Combined output 920hp
Torque: 730Nm at 4,000-7,000rpm
Transmission: 8-speed dual-clutch automatic
Fuel consumption: 11.2L/100km
On sale: Now, deliveries expected later in 2025
Price: expected to start at Dh1,432,000
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
Common OCD symptoms and how they manifest
Checking: the obsession or thoughts focus on some harm coming from things not being as they should, which usually centre around the theme of safety. For example, the obsession is “the building will burn down”, therefore the compulsion is checking that the oven is switched off.
Contamination: the obsession is focused on the presence of germs, dirt or harmful bacteria and how this will impact the person and/or their loved ones. For example, the obsession is “the floor is dirty; me and my family will get sick and die”, the compulsion is repetitive cleaning.
Orderliness: the obsession is a fear of sitting with uncomfortable feelings, or to prevent harm coming to oneself or others. Objectively there appears to be no logical link between the obsession and compulsion. For example,” I won’t feel right if the jars aren’t lined up” or “harm will come to my family if I don’t line up all the jars”, so the compulsion is therefore lining up the jars.
Intrusive thoughts: the intrusive thought is usually highly distressing and repetitive. Common examples may include thoughts of perpetrating violence towards others, harming others, or questions over one’s character or deeds, usually in conflict with the person’s true values. An example would be: “I think I might hurt my family”, which in turn leads to the compulsion of avoiding social gatherings.
Hoarding: the intrusive thought is the overvaluing of objects or possessions, while the compulsion is stashing or hoarding these items and refusing to let them go. For example, “this newspaper may come in useful one day”, therefore, the compulsion is hoarding newspapers instead of discarding them the next day.
Source: Dr Robert Chandler, clinical psychologist at Lighthouse Arabia
Results:
5pm: Abu Dhabi Fillies Classic (PA) Prestige Dh 110,000 1.400m | Winner: AF Mouthirah, Tadhg O’Shea (jockey), Ernst Oertel (trainer)
5.30pm: Abu Dhabi Colts Classic (PA) Prestige Dh 110,000 1,400m | Winner: AF Saab, Antonio Fresu, Ernst Oertel
6pm: Maiden (PA) Dh 80,000 1,600m | Winner: Majd Al Gharbia, Saif Al Balushi, Ridha ben Attia
6.30pm: Abu Dhabi Championship (PA) Listed Dh 180,000 1,600m | Winner: RB Money To Burn, Pat Cosgrave, Eric Lemartinel
7pm: Wathba Stallions Cup (PA) Handicap Dh 70,000 2,200m | Winner: AF Kafu, Tadhg O’Shea, Ernst Oertel
7.30pm: Handicap (PA) Dh 100,000 2,400m | Winner: Brass Ring, Fabrice Veron, Ismail Mohammed
Racecard
2pm Handicap Dh 90,000 1,800m
2.30pm Handicap Dh120,000 1,950m
3pm Handicap Dh105,000 1,600m
3.30pm Jebel Ali Classic Conditions Dh300,000 1,400m
4pm Maiden Dh75,000 1,600m
4.30pm Conditions Dh250,000 1,400m
5pm Maiden Dh75,000 1,600m
5.30pm Handicap Dh85,000 1,000m
The National selections:
2pm Arch Gold
2.30pm Conclusion
3pm Al Battar
3.30pm Golden Jaguar
4pm Al Motayar
4.30pm Tapi Sioux
5pm Leadership
5.30pm Dahawi
Fifa Club World Cup quarter-final
Esperance de Tunis 0
Al Ain 3 (Ahmed 02’, El Shahat 17’, Al Ahbabi 60’)
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
THE SIXTH SENSE
Starring: Bruce Willis, Toni Collette, Hayley Joel Osment
Director: M. Night Shyamalan
Rating: 5/5
