ESG Investors Succeed in the Bond Market

New research on corporate bonds shows that investors driven by environmental, social and governance (ESG) mandates have reduced the cost of capital for “green” companies – thereby achieving their goal of addressing concerns around climate change.

Concerns over global warming and the economic risks of climate change have drawn increasing attention from not only equity investors but bond investors as well. Consider the following examples:

  • AXA, a giant multinational insurance firm managing $790 billion in assets, now avoids portfolios with global warming potential by shifting away from heavy polluters.
  • Wells Fargo Asset Management launched a climate transition credit strategy in June 2021 with the intention to decarbonize their fixed-income portfolios.
  • State Street Global Advisors launched the State Street Sustainable Climate Bond Funds in June 2021 with the aim of significantly reducing investors’ exposure to carbon emissions.
  • The Bank of England committed in May 2021 to use its $28 billion of corporate bond holdings to nudge companies to cut greenhouse gas emissions faster.