Corporate Clients Shying Away from ESG Debt Market

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Finance Notícia

ESG Debt Market,Sustainability-Linked Loans,Greenwashing

Extra regulatory requirements, fewer financial incentives and the risk of being accused of greenwashing are putting off clients who just a few years ago were champing at the bit to attach an environmental, social or governance label to their financing.

In the world’s second-biggest ESG debt market, corporate clients are starting to walk away. Extra regulatory requirements, fewer financial incentives and the risk of being accused of greenwashing are putting off clients who just a few years ago were champing at the bit to attach an environmental, social or governance label to their financing, according to bankers and lawyers close to the market.

The products in question are so-called sustainability-linked loans, a market that BloombergNEF has estimated is worth $1.5 trillion, making it second in size only to the global market for green bonds. Largely unfettered by regulations, borrowers and financiers have been relatively free to construct their own standards for SLLs. But as financial watchdogs start to erect guardrails around ESG labeling, a broader market retreat appears to be underway. Last year, issuance of SLLs plummeted 56% to $203 billion, according to data compiled by Bloomberg

 

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