Goldman Sachs Group Inc (NYSE:GS). anticipates a significant reduction in Environmental, Social, and Governance (ESG)-labeled debt issuance by US firms this year, according to an analysis. The report forecasts a halving of such issuances, attributing the divergence from European trends to differing regulatory frameworks.
The analysis indicates that Europe's infrastructure is more favorable to ESG-focused debt, which has led to a surge in such instruments in the region. The analysts also highlighted the impact of political figures like Florida Governor Ron DeSantis on green bond issuance in the US.
In addition to these findings, the report notes a diminishing role of utility and energy sectors in US ESG issuance. It reveals that ESG-labeled bonds account for only 3% of total dollar-denominated supply.
Using data from Morningstar Direct, the report also examines global ESG fixed-income fund trends. It showcases a 5.5% increase in fund flows and the launch of 253 new ESG funds.
The implications of these developments are significant for investors eyeing the energy transition theme or €140 billion (€1 = $1.05) worth of European investment-grade ESG issuance expected this year. The report underscores that these trends could influence investment decisions and strategies as the global market continues to navigate towards sustainable finance.
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