Credit investors in ESG to focus more on social issues in 2022, says report – Pensions & Investments

Credit investors in ESG to focus more on social issues in 2022, says report  Pensions & InvestmentsCredit investors in ESG to focus more on social issues in 2022, says report  Pensions & InvestmentsCredit investors in ESG to focus more on social issues in 2022, says report  Pensions & Investments

According to Sustainable Fitch, an ESG research company, social issues are becoming more important as a risk for ESG investors and regulators.
ESG Credit Trends 2022: The Report also predicts a stronger nexus among environmental and social issues as ESG Integration progresses. Disclosures and data are also included in the report.
“How these issues develop in 2022 may reveal intensifying transmission mechanism of ESG risks into possible credit risks,” Marina Petroleka (global head of ESG research at Sustainable Fitch in London) said in the report.
Sustainable Fitch expects to see more sustainability and sustainability-linked debt issued in 2022 as investors combine climate and social objectives under single mandates. This will be aided by the EU’s draft Social Taxonomy, which will be released in 2022, and a Corporate Sustainability Reporting Directive, which is currently under development, that will likely include working conditions and supply chains.
Investors are increasingly concerned about social issues. This could be manifested in a variety of ways, including increased attention to how investment strategies impact financing a low carbon economy and at-risk population, more scrutiny of supply-chain issues, and increased issuance of sustainability bonds.
The report found that social and sustainability bonds issued in 2020 nearly tripled in value from the previous year, to more than $250 billion. This was mainly due to government pandemic bonds, which provide social support to workers and industries affected by shutdowns. The green market bond market, however, grew by 8% during the same period.
The report pointed out that bonds that finance green infrastructure could also be aligned with social objectives. Although the social bond market was dominated by governments and related entities for low-income housing and other social welfare activities in the past, corporations are increasingly using a portion of sustainability bonds to address socially inclusive activities. Pfizer Inc., Toyota Motor Corp. and Kellogg Co. have bonds that target food insecurity, disability, and health vulnerability.
“We expect to see growth in (sustainability-linked bonds) with a combination of green and social targets for issuers that lack the dedicated assets necessary for a use-of-proceeds bond,” the report said, along with a continued focus on diversity by investors and other stakeholders.

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