Brunswick insights into the alignment of sustainable bonds and corporate ESG strategies
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How companies communicate the issuance of sustainable debt matters and has implications for their broader ESG and business strategies. These instruments offer corporates and investors a valuable tool to achieve their ESG objectives.
Sustainable bonds are a relatively recent market that will continue to grow steadily this decade as financial institutions are compelled to redirect capital to help fund the transition to net-zero emissions and the delivery of the UN Sustainable Development Goals (SDGs). Companies may benefit from this form of sustainable finance “at a greenium,” obtaining more advantageous terms than those offered by vanilla bonds, while enjoying the “halo effect” of aligning capital with environmental and societal challenges.
However, these securities require a specialist communication engagement from the beginning that highlights the objectives of the issuance, use of proceeds and key milestones. It requires a tailored approach that is consistent with the company’s existing ESG communication strategy and adapts to the needs of its sector and industry classification.
Poorly designed and managed communication can undermine a bond and bring reputational and financial risks. For example, it can prevent the security from inclusion in sustainable bond indices. The main index providers and ESG rating agencies routinely evaluate the credentials of bonds and engage with issuers on their progress. To avoid greenwashing, they check that the use of proceeds is appropriately earmarked.
Forthcoming ESG regulations, combined with increased scrutiny from stakeholders, adds another layer of complexity that requires careful planning. Brunswick Group, as a global critical business issues firm with ample cross sector expertise, is well placed to assist issuers from the early stages of a sustainable bond transaction.