Green, blue, or brown: Fixing the colour of ESG debt – MENAFN.COM


(MENAFN - Gulf Times) Globally, more than $40. 5tn is now estimated to be invested using 'environmental, social, and governance (ESG) analyses. And the past five years have seen an unprecedented increase in investors' ESG awareness. Record demand for sustainable finance is now spurring a rainbow of debt types by governments and companies, to fund increasingly specific ways of mitigating climate change.

While green bonds which pledge their proceeds to finance wind farms or solar parks are the dominant debt meme, some of these labels have so far remained relatively niche. That's set to change as a market now worth over $2tn develops rapidly with financial engineers creating new ways to brand such debt. It's only five years since the world's first green sovereign debt was issued by coal-reliant Poland, to help transition to a lower-carbon economy. Now the emerging spin-offs include blue bonds to fund marine and water projects; brown or transition bonds for industries too dirty to do green; nature bonds for biodiversity and carbon neutral to achieve net-zero emissions. There's also social bonds to help society and sustainability-linked bonds (SLBs) to set organisation-wide targets. Chinese banks issued their first blue and carbon-neutral bonds in recent months. Junk-rated more...