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Bond Issuers With Top ESG Ratings Include Consumer Brands and European Banks  Barron’s

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2021: The year of the sustainability-linked loan  Lexology

VP Bank : Rapidly growing market for bonds with an impact  marketscreener.com

Sustainable Financing Helping Companies Achieve ESG Targets – Environment – Canada  Mondaq News AlertsBond Issuers With Top ESG Ratings Include Consumer Brands and European Banks  Barron’s

2021: The year of the sustainability-linked loan  Lexology

VP Bank : Rapidly growing market for bonds with an impact  marketscreener.com

Sustainable Financing Helping Companies Achieve ESG Targets – Environment – Canada  Mondaq News Alerts

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Sage Advisory found 44 bond issuers with top marks for environmental, social, and governance impact. Consumer brands and European banks stood out.

Justin Sullivan/Getty Images

Investors are paying more attention to companies’ environmental, social, and governance impact when building portfolios. Apart from evaluating publicly listed firms with stock offerings, they’re applying the same standards to the thousands of bond issuers as well. 

Sage Advisory assessed the inherent ESG risks—especially those that might be financially material—of more than 1,200 bond issuers of U.S. dollar-denominated debt. Sage gave 44 of them the highest score, a five-leaf rating, indicating they are leaders of ESG practices among peers.

Of the companies Sage assessed, 11% are privately held, which are typically not covered by the other ESG-rating frameworks mainly serving stock investors. The top-rated bond issuers range across 24 industries, including processed-food company


Campbell Soup

(ticker: CPB), consumer-goods retailer


Procter & Gamble

(PG), and ​​networking giant


Cisco Systems

(CSCO). 

While nearly two thirds of the bond issuers with top ESG ratings are U.S.-based companies, European commercial banks had a substantial presence. A more stringent regulatory environment in Europe was the main reason, says Robert Smith, co-founder and president of Sage Advisory.

European banks face more restrictions than their counterparts elsewhere, and tend to provide a greater amount of information on ESG matters, including who they’re providing finance to and what the nature of that financing is. This kind of information is still difficult to obtain for U.S. banks, says Smith.

Tech represents a large number of the top ESG companies as well, thanks to their consistent focus on employee diversity, energy management, and cybersecurity.

Interestingly, household and personal products, an industry not traditionally known for its ESG strength, was also well represented. Companies in this group rely heavily on consumer preference and sentiment, says Emma Harper, senior ESG research analyst at Sage and author of the research. As consumers become more aware of how their purchase could impact the society and environment, companies have to put extra effort into sustainable initiatives such as supply chain and the sourcing of raw material. 

“There has been a lot of push for greater transparency,” says Harper, “Companies understand that brand awareness and reputation do affect their revenues.”

Fixed-income credit ratings and ESG ratings are usually positively correlated, which means more sustainable companies often have favorable credit ratings as well. Still, this doesn’t mean there is no exception. Among the 44 bond issuers with five-leaf ratings, five are below investment grade. They are:


Seagate Technology

(STX),


Nokia

(NOK), Ball (BLL),


Host Hotels & Resorts

(HST), and


Iron Mountain

(IRM).  

Broomfield, Colo.-based packaging company Ball, for example, is highly regarded in the ESG space due to its various sustainability initiatives, such as product life-cycle assessments, carbon-footprint reduction, and energy efficiency. But the firm is a high-yield bond issuer according to Moody’s and S&P credit rating. 

Another growing trend worth observing is the increasing profile of so-called “impact bonds”—those directly addressing a particular sustainable challenge with the money raised, or setting an ESG-related goal as a condition for the bond issuance. According to the Climate Bonds Initiative, the total issuance of impact bonds reached roughly $496 billion in the first half of 2021, up 59% from the same period in 2020. About one third of the top-rated bond issuers by Sage have issued impact bonds in 2021.

DiageoBeveragesA-BNP ParibasCommercial Banks & Capital MarketsA+IntesanPaoloCommercial Banks & Capital MarketsBBBCooperatieve RabobankCommercial Banks & Capital MarketsA+Societe Generale Commercial Banks & Capital MarketsALloyds Banking Commercial Banks & Capital MarketsBBB+ABB Electrical EquipmentA-Legrand FranceElectronic ComponentsA-Seagate TechnologiesElectronic ComponentsBB+HP Electronic Devices & AppliancesBBBNokia Electronic Devices & AppliancesBB+Cisco SystemsElectronic Devices & AppliancesAA-Dell Technologies Electronic Devices & AppliancesBBBHewlett Packard Enterprise Electronic Devices & AppliancesBBBCampbell Soup Food ProductsBBB-UnileverFood ProductsA+Kellogg Food ProductsBBBSteelcaseFurniture & FittingsBBB-CNH Industrial Heavy Trucks & Construction & Farm MachineryBBBReckitt Benckiser Household & Personal ProductsA-Colgate-Palmolive Household & Personal ProductsAA-Kimberly-Clark Household & Personal ProductsAThe Procter & Gamble Household & Personal ProductsAA-AXA InsuranceAMuenchener RueckversicherungsGesellschaftInsuranceAA-Swiss Re InsuranceAAegonInsuranceA-Microsoft Interactive Media & Online Consumer ServicesAAAInternational Business Machines IT Consulting & Other ServicesA-Cigna Managed Health CareA-RELX MediaBBB+WPPMediaBBBBall PackagingBB+Host Hotels & ResortsReal EstateBB+Kilroy Realty Real EstateBBBCBRE Research & Consulting ServicesBBB+Iron Mountain IncorporatedResearch & Consulting ServicesBB-Best BuyRetailBBB+Intel SemiconductorsA+salesforce.comSoftware & Diversified IT ServicesA+AdobeSoftware & Diversified IT ServicesA+Oracle Software & Diversified IT ServicesBBB+W.W. GraingerTrading Companies & DistributorsA+United UtilitiesWater and Waste UtilitiesBBB

Source: Sage Advisory

Write to Evie Liu at evie.liu@barrons.com

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