The environmental, social, and governance (ESG) market has rapidly evolved over the last few years, with a myriad of bond products emerging from the market due to an ever-growing demand for sustainable assets. By March, ESG-themed bond issuance topped €3 trillion worldwide, making it a powerful asset class.
What had begun as the development of the green bond market was followed by a surge in social bond issuance in response to the pandemic crisis of 2020 and 2021. This accelerated the growth of the asset class. Most of this market growth has been driven by European public and corporate issuers and denominated in euros, which remains the currency of choice for ESG bonds and represents close to 50% of total ESG debt issued so far in 2023.
Such rapid growth in ESG assets has generated an intense focus on thematic or labelled bonds from investors who, until recently, focused their ESG requirements on these specific products.
But the introduction of regulatory disclosure requirements, as well as the development of new ESG rating and scoring methodologies, has encouraged investors to turn to a more holistic approach to ESG by taking a broader perspective and looking at the global sustainable strategy and disclosures of companies rather than just their portfolio of green assets. The ESM, particularly in light of the steep increase in issuance and the various products available, is determined to continue implementing such a holistic approach in its investment decisions or institutional actions as part of a global sustainable strategy.
Both the holistic approach and the success of sustainable projects matter to the ESM because they could help secure prosperity in the future and maintain financial stability, the mandate of the euro area’s firefighter. (...)
What had begun as the development of the green bond market was followed by a surge in social bond issuance in response to the pandemic crisis of 2020 and 2021. This accelerated the growth of the asset class. Most of this market growth has been driven by European public and corporate issuers and denominated in euros, which remains the currency of choice for ESG bonds and represents close to 50% of total ESG debt issued so far in 2023.
Such rapid growth in ESG assets has generated an intense focus on thematic or labelled bonds from investors who, until recently, focused their ESG requirements on these specific products.
But the introduction of regulatory disclosure requirements, as well as the development of new ESG rating and scoring methodologies, has encouraged investors to turn to a more holistic approach to ESG by taking a broader perspective and looking at the global sustainable strategy and disclosures of companies rather than just their portfolio of green assets. The ESM, particularly in light of the steep increase in issuance and the various products available, is determined to continue implementing such a holistic approach in its investment decisions or institutional actions as part of a global sustainable strategy.
Both the holistic approach and the success of sustainable projects matter to the ESM because they could help secure prosperity in the future and maintain financial stability, the mandate of the euro area’s firefighter. (...)
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