The Strategist

Goldman expects US corporate ESG bond issuance to halve in 2023

10/09/2023 - 03:15

According to Goldman Sachs Group Inc. experts, the total amount of ESG-bonds issued by US firms will be half as low in 2023 as it was in the past.
The analysis conducted by a group of Goldman analysts states that the situation in the U.S. differs from developments in Europe, where the issue of corporate securities linked to the execution of environmental, social policy, and corporate governance goals is more encouraged.

This discrepancy is primarily caused by influential Republicans’ political criticism of ESG in the US.

It has become challenging to issue ESG bonds in the US due to this reason and because of the consequences of the energy crisis, which have increased fuel prices and compelled big oil companies to delay green transition plans.

Additionally, the whole US bond market is seeing negative consequences from the country's rising interest rates. Last week, the 30-year US Treasury yield reached its highest level since 2007.

The total amount of corporate dollar ESG bonds with investment grade ratings expected to be issued this year is estimated by Goldman to be around $40 billion. This amount represents only 40% of issuance in 2021 and is less than half of what was issued last year.

Therefore, just 3% of the entire dollar volume of investment-grade corporate bonds will be made up of ESG bonds, according to Goldman.

The bank’s analysts Michael Puempel and Sienna Mori, this is "significantly below" the levels of prior years, when the proportion of ESG-bonds in the total amount of bonds issued was twice as large.