Sustainability-linked bond sales have tanked amid a shift in ESG sentiment

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Sustainability-linked bonds have seen a sharp slowdown in sales amid the shift in sentiment toward investing based on environmental, social, and governance principles.

According to data compiled by Bloomberg Intelligence, companies and governments have raised 46% less money via bond sales tied to sustainability goals this year compared to last, coming in at $37.6 billion.

That’s the lowest amount since 2020, and comes as the US saw zero bond issuance in the space this year, with countries in Asia, Europe, the Middle East, and Africa to pulling ahead. Issuance in Asia surpassed the US for the first time.

The bonds are tied not to particular projects but to issuers’ ESG targets, like emissions reduction goals or carbon credit purchases, and amount to a market worth $319 billion, the data shows.

The drop in bond issuance comes amid a broader pushback against ESG, and difficulties with these types of bonds in particular.

Companies have faced backlash for “greenwashing,” or using deceptive marketing tactics to appear more sustainable than they are. There have also been hurdles to accurately track progress toward sustainability goals linked to the bonds.

Other corners of the debt market tied to ESG goals are faring better, though.

Green bond issuance has totaled $684.8 billion so far this year, closely followed by social bonds at $628.9 billion. Sustainability bonds and sustainability-linked loans have amounted to $244 billion and $226.6 billion, respectively, while green loans have totaled $132.9 billion, Bloomberg Intelligence data shows.

The decline in the sustainability-linked market comes as investor sentiment toward ESG investing in general has shifted.

A survey from researchers at Stanford University, the Hoover Institution, and the Rock Center for Corporate Governance found that Millennial and Gen Z investors in particular are showing less interest in socially responsible investing than in past years.

Those who responded that they are “very concerned about environmental issues” fell to 49% last year, compared to 70% in 2022, while those who said they are “very concerned about social issues” dropped to 53% from 65% in 2022.

Younger cohorts are investing more like boomers, paying less attention to values-based investing and more on what assets will provide the best returns.

The sector is expected to encounter further difficulty in Donald Trump’s second term, with his proposed policies already roiling clean energy stocks.