Despite a drop
in clean-energy stocks and intensifying concerns about widespread
greenwashing, the market for investment products sold as being ESG-related
had another record year by most yardsticks.
Despite a drop in clean-energy stocks and intensifying concerns about
widespread greenwashing, the market for investment products
sold as being ESG-related had another record year by most yardsticks.
sustainable loans and bonds, where proceeds are supposedly
earmarked for environmental projects or to further a company’s social
goals, exceeded $1.5 trillion, including about $505 billion of green
bond sales; ESG-focused
exchange-traded funds attracted almost $130 billion in
2021, up from $75 billion a year ago; and investment in early-stage
climate tech companies approached $50 billion.
It also was a year of big fees for U.S. managers of sustainable funds,
revenue climbing to almost $1.8 billion from $1.1 billion
in 2020, according to data compiled by researchers at Morningstar Inc.
But not everything went one way. The
S&P Global Clean Energy Index, which includes companies
like wind-energy giant Orsted AS, Spanish utility Iberdrola SA and
Sunrun Inc., the largest U.S. residential-solar company, has declined
27% so far in 2021, after more than doubling in value last year.
The outlook for green stocks is challenging because of worries about
rising interest rates tied to inflation, unpredictable U.S. politics
and regulatory maneuvers like
California’s decision to sharply lower subsidies and add
new fees for home solar users, said Sophie Karp, an analyst at KeyBanc
“Despite long-term growth prospects, there is
waning enthusiasm for the sector,” she said.
Adeline Diab, head of ESG research for EMEA and the Asia-Pacific
region at Bloomberg Intelligence, agreed. On Dec. 21, she wrote:
“Despite mounting catalysts with the U.S. infrastructure plan and EU
taxonomy requirements, the clean-energy sector may remain exposed to
uncertainty linked to government support such as stimulus delays or
incentives-cuts announcements, the most recent being in California.”
Shares of renewable energy stocks hit another speed bump this week
when U.S. Senator Joe Manchin, a conservative Democrat from coal state
West Virginia, shocked his own party by announcing his
opposition to President Joe Biden’s economic plan, which
includes a landmark investment in the fight against global warming.
Manchin, whose vote in an evenly-split Senate was needed in the face
of universal Republican opposition to significant efforts to fight
global warming, has undermined Biden’s bid to address the climate
Even with the stock market slide, this year was still the first since
the Paris climate agreement in late 2015 that
more money went into green bonds than debt issued by oil,
gas and coal companies.
And next year is shaping up to be bigger. Analysts at Morgan Stanley
estimate that green bond issuance will approach $1 trillion in 2022,
led by sales from the European Union.
Bank of America Corp., the biggest corporate issuer of U.S. bonds sold
as being tied to environmental, social and governance factors, also is
predicting another big year for global sales of the debt.
“Will ESG primary issuance market double again in 2022? We’re not
making that prediction,” said Karen Fang, the bank’s global head of
sustainable finance, in an interview last week. “But we do think it
will grow very, very strongly given the momentum behind the global
net-zero transition and investor demand.”
Emmanuel Roman, chief executive officer of Pacific
Investment Management Co. (PIMCO), at the Milken Institute Global
Conference in Beverly Hills, California, on Oct. 18.
Photographer: Kyle Grillot/Bloomberg
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