ABN Amro analysts see ESG bond issuance dropping ‘considerably'
ESG issuance is 'expected to considerably lag in 2025', amid 'a noticeable surge in negative news related to ESG in the first half of the year', analysts Marta Ferro Teixeira and Filipa de Carvalho Tomas wrote in a note on Friday (Jul 18).
They now see issuance of 247 billion euros (S$369 billion), down from an earlier forecast of 266 billion euros. In 2024, issuance reached 272 billion euros, they said.
Interest in financial products claiming to target environmental, social and governance goals is flagging amid politically motivated attacks on so-called 'woke' capitalism, combined with evidence of greenwashing. The global market for ESG funds saw its worst quarter on record in the three months through March, as the broad-based backlash against the investment strategy gains ground.
The ABN Amro analysts pointed to US President Donald Trump's decision to declare a national energy emergency as a key reason for the decline, with policies in the world's largest economy now 'prioritising fossil fuels over clean energy initiatives', they wrote.
The shift in sentiment has led oil producers such as BP to cut back on their renewable energy programmes, while major banks have been turning their backs on the world's biggest climate alliance for the industry. Such developments raise 'concerns about waning climate commitments', Teixeira and Tomas wrote.
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At the same time, efforts in Europe to simplify ESG rules 'suggest that both regulators and companies worldwide might be scaling back their climate ambitions', the analysts said.
ABN Amro's analysis shows that ESG issuance from utilities has fallen short, while sovereign issuance has taken a small hit in part as bond sales under Europe's NextGenerationEU programme lag behind earlier expectations, they wrote.
The overall effect is one that the analysts said they 'consider not as negative, given the significant policy shifts in some other Western countries'.
Finally, the ABN Amro analysts noted that 'there is a lengthy process for ESG bond issuances, and timing for issuance becomes a key factor during volatile markets, which might have been an additional contributing factor for why issuers have given preference to non-ESG labelled debt'. BLOOMBERG
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