May 7, 2020 - Economy & Business

Coronavirus could do long-term environmental harm by reducing green investments

Reproduced from Moody's, with April data from Refinitiv; Chart: Axios Visuals
Reproduced from Moody's, with April data from Refinitiv; Chart: Axios Visuals

In the short term, the coronavirus pandemic is reducing global emissions and helping clear out smog around the world, but it may end up doing more damage to the environment in the long term.

The big picture: The pandemic is helping reduce the use of fossil fuels, but it is decreasing investments in things like wind and solar power and financial assets like green bonds, says Jessica Ground, global head of stewardship at Schroders.

  • "Those longer-term issues that we need finance to solve like climate change haven’t gone away and they’re still going to be here whenever we emerge from lockdown."

Driving the news: In April, total issuance of ESG bonds — green, sustainability, and social bonds — increased by 272% year over year and was double the total from March, reaching $48.5 billion, according to data from Morgan Stanley.

  • And for the first time ever, monthly sustainability bond issuance ($19.4 billion) eclipsed green bond issuance ($16.8 billion).

What it means: ESG bonds are specifically earmarked to raise money for positive social outcomes or climate and environmental projects.

Yes, but: 76% of the total ESG issuance in April came from multilateral development banks, with the majority supporting COVID-19 relief efforts, Moody's found in a recent analysis.

  • The pandemic also is pushing more companies to issue new debt to fortify their balance sheets, crowding out green bonds and other environmentally focused financial instruments.

Where it stands: Total global sustainable bond issuance fell 32% in the first quarter from Q4 2019, and green bond volumes declined 49%, per Moody's.

  • Analysts now expect their original $400 billion forecast for total sustainable bond issuance in 2020 is no longer in reach and anticipate green bond volumes falling well below their previous estimate of $300 billion.

Go deeper: 10 ways coronavirus is changing energy and climate change

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