May 27, 2021 Read More →

All-purpose sustainability-linked bonds slammed by major fund

Bloomberg ($):

Nuveen, the $1.2 trillion money manager, is staying away from one of the hottest part of the sustainable bond market.

While investors embrace newly minted sustainability-linked bonds, or SLBs, and companies are increasingly serious about managing climate risk, the debt structure is “lacking” from the perspective of an impact investor, according to Stephen Liberatore, head of fixed-income ESG and impact investing strategies at the firm.

“We are underwhelmed by the goals and penalties associated with recent SLB deals,” Liberatore wrote in a blog post on Tuesday. “The goals or targets can be gamed to make them relatively easy to achieve, sometimes based on the issuer’s current trajectory, and without the need for meaningful new investment.” 

Unlike green or social bonds that can only be used to fund specific projects, proceeds from sustainability-linked bonds can be used for just about anything. The issuer simply pledges to meet some sort of social or environmental target. Global sales of the bonds stand at a record $24.8 billion so far this year, according to data compiled by Bloomberg. Sales could hit as much as $150 billion by the end of this year, according to JPMorgan Chase & Co.

[David Caleb Mutua]

More: Nuveen Slams Sustainability-Linked Bonds on Structural Loopholes

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