“Greater focus on ESG in emerging markets will spur growth in sustainable debt” – Moody’s – March 17, 2020

On March 17, 2020 Moody’s Investor Services reported:

  • “Emerging market issuers’ sustainability credentials to come under greater investor scrutiny in 2020 and beyond
  • Coronavirus fallout poses risks to sustainable bond issuance across emerging markets in 2020

Increased investor focus on debt issuers’ exposure to environmental, social and governance (ESG) issues and broader sustainability credentials will underpin strong growth in green, social and sustainability bonds (“sustainable bonds”) across global emerging markets in the coming years.

That said, the fallout from the coronavirus outbreak has dampened the near-term growth prospects for sustainable bonds following last year’s record issuance of $56 billion, as prolonged market disruption could deter issuers from coming to market.

Emerging market economies are often more susceptible to ESG risks, such as physical climate hazards or income inequality, than their developed market peers and they face immense investment needs to finance sustainable development. The funding gap needed to meet the UN Sustainable Development Goals in developing economies will be around $2.5 trillion to $3.0 trillion each year up to 2030.

‘Sustainable finance in emerging markets is coming of age,’ said Rahul Ghosh, a Moody’s Senior Vice President and the report’s author. ‘Emerging market issuers in exposed sectors and regions will encounter growing pressure to adapt their business models and undertake investments to reduce or mitigate underlying ESG exposures. Those that outline clear financing plans to reduce their ESG and climate risk exposures stand to benefit from robust investor demand.’

The long-term issuance outlook is favourable given that sustainable bonds remain under-represented when compared with the relative financial and economic importance of emerging markets.”

You can read more on the Moody’s internet site.

Subscribers may download the report here.