Perspective 1: Companies are formalising EGS strategies & targets
The latest UN IPCC report points to the urgency for society at large to address climate change. This increased focus means US issuers are taking a more formal approach to environmental strategies, with a growing number setting ambitious science-based targets to demonstrate the legitimacy of their businesses’ green credentials.
In addition, investor demand and expectations are also driving net zero and sustainability commitments.
This investor evolution has in some part been prompted by more advanced standards and regulations and standards across other markets. The investor landscape has grown from a few active green investors, to a broad effort to integrate ESG into all investment decisions.
We expect that governmental influence, through market regulations, and the SEC’s move to formalise ESG data disclosures in the coming years is driving many companies to already begin preparations to address anticipated reporting requirements.
Perspective 2: ESG issuance broadens & diversifies across sectors
ESG financing has grown across all sectors and currencies but particularly in the US Dollar Corporate and Financial Institutions universe, where we’re on pace to double last year’s record issuance levels.
And where utilities and real estate previously dominated, ESG financing is now widespread across a number of industries such as Technology, Consumer, and Industrials.
We believe the current US administration’s support of broader environmental and social sustainability goals through proposed legislation may prove a catalyst for continued growth in ESG issuance in the future.
Perspective 3: Socially-focused issuance part of an evolving product set
The pandemic, and its acute exposure of societal issues fuelled a wave of ‘S’ focussed issuance, complementing more traditional environmental initiatives.
And the focus on social has continued throughout 2021, with issuers exploring new ways to link capital raises to social uses of proceeds, whether to directly benefit their business or operations, or in order to help the communities in which they operate.
The ESG product set also expanded in 2021 with the increase in sustainability linked securities in the US. Looking ahead, sustainability-linked bond issuance is expected to grow meaningfully in the near term, fuelling a significant increase in overall sustainable finance volumes.
To date, ESG issuance in the US market has been playing catch up with Europe. But with the current corporate and government focus, and financial product innovation to match investor demand, ESG issuance in the world’s largest market is poised for rapid expansion.
