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Green bond market correction looms

May 6, 2022
Top 5 ESG bond sales, by company
Data: Bloomberg; Chart: Baidi Wang/Axios

Just a handful of large sales are driving the ESG bond market's performance, and that's setting up a treacherous balance in green ETFs.

Why it matters: Green ETF's have outperformed the S&P so far this year amid global instability and market pressures.

What's happening: A handful of large sales from just two companies are propping up the market for ESG bond sales, Bloomberg reports.

  • TenneT executed the single largest green bond sale ever on May 1, €3.85 billion (~$4.06 billion) to fund sustainable electricity grid projects in Europe.
  • Investors placed more than €8 billion in bids following a slowdown of green bond issuance in Europe following Russia’s invasion of Ukraine, Bloomberg reports.
  • Bloomberg also reported that more than $1.2 billion went into ESG-focused ETFs just last week while the S&P dropped 3.8% due to concerns about inflation, increasing interest rates and Russia’s war on Ukraine.

Yes, but: Bloomberg Intelligence issued a report last week noting that "a slowdown after record growth could be prolonged, at least in the U.S., as ESG returns continue to face challenges" following a Q1 decline.

  • The analysts attributed the lack of diversification among sellers and market-moving one-off sales as one of the main causes of concern even as inflows remain positive.
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