ESG Green Bond Debt Is Growing

By Max Chen10 days ago

Debt tied to carbon emissions may have low financial penalties butcan also ding issuers on intangibles like their reputation.

There has been an increased jump in issuance of bonds and loans tied to environmental, social, and governance performance, or ESG, to meet the huge demand from investors for socially responsible investments, the Wall Street Journal reports.

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Lenders have long put conditions on ratchet loans or step-ups on bonds that change rates depending on a companys financial performance. Now, there are more looking into tying interest costs to nonfinancial risks, like reducing carbon emissions or improving governance. Consequently, an investors would get paid more if the companies fail to meet their ESG goals.

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