Banks Are Really Cashing In on ESG Bonds BNNBanks Are Really Cashing In on ESG Bonds BNNBanks Are Really Cashing In on ESG Bonds BNN
Impact Investing Forum 2022
London. Dec 07-08, 2022.
(Bloomberg). Despite being criticized for helping fossil fuel producers raise money in debt markets, banks are making more money underwriting ESG-related bonds sales. According to Bloomberg data, banks earned $3.6 billion in fees from arranging sales bonds that were advertised as instruments of sustainable, green or social development for companies, governments, and other organizations. This is more than twice the $1.6 billion that banks have received from issuing fossil-fuel company debt. These numbers are further evidence of the seemingly endless stream of money flowing into governance, environmental and social investing. Bloomberg data shows that ESG-related bonds were issued for $750 billion this year, compared to $468 billion in 2020. It is unclear whether these bonds actually fund the claims they make. This is despite the fact that there have been $468 billion of ESG-related bonds issued this year, according to Bloomberg data. “Investment banks are almost always driven by what customers want, and demand for environmentally-friendly bonds isn’t going to wane anytime soon,” said Jeff Harte, an analyst at Piper Sandler Cos.Harte adds there are growing regulatory and political pressures on the financial industry to do something about the deteriorating state of the planet, and that’s also providing an incentive to participate in ESG.JPMorgan Chase & Co., the world’s top debt underwriter, is the No. The No. 1 arranger of bonds sales for the fossil fuel sector. Even though it plays a key role in helping companies that are most responsible for global warming and has become more dependent on ESG, JPMorgan is now even more dependent on ESG. Bloomberg data shows that nearly 13% of JPMorgan’s total bond underwriting business in New York comes from issuing ESG related debt instruments. This is an increase of 5% from last year and just 2% from 2018. JPMorgan now earns more in total fees for underwriting ESG debt ($223 million so far 2021) than it does from arranging bonds sales for fossil fuel companies ($94 million). Bloomberg data shows that Jamie Dimon, the CEO of JPMorgan, earned $16 million from ESG sales in 2016 and $107 million from fossil fuel debt sales in 2017. BNP Paribas SA, the giant French bank, now generates 21% from ESG compared to 1% five years ago. Paris-based Credit Agricole SA, which is one of the largest banks in the world, is the most focused on ESG. 31% of the company’s debt underwriting this year came from that market. Citigroup Inc. has 11%, which is up from 0.5% in 2016. Mike Mayo, analyst at Wells Fargo Securities, said that he expects that the numbers will grow. He said that it is still early days for climate financing and ESG facilitation. “In baseball terms, it’s the first inning. “But, even if all that debt were funding solid ESG initiatives the world would still need five times as much money to address climate disruptions. Mayo stated that banks are more than happy help make this happen. He said that banks can be profitable if they do what is best for society and the environment. “We’re not talking about non-profit institutions. “Sustainable financing in shortClimate change threatens one of the largest bread baskets in the world. The hedge fund titan claims that nothing can save oil industry. However, Arctic oil and gas exploration are booming. All government debt is facing a reckoning. Why is everyone talking so much about a global power crisis? Every Wednesday, Bloomberg Green publishes an ESG-focused newsletter that provides unique insights on climate-conscious investing. (C)2021 Bloomberg L.P.