ESG Insights: Trends, Analysis & Our Featured Chart #1

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For financial professionals only

This week’s ESG update highlights some positive news on bonds and a milestone with Barclays bank stopping financing new oil and gas projects.  Less positive is the news that two of the largest US investors have exited a key climate initiative, while global temperatures continue rising. 

Here’s the key takeaways:

  • Green, Social & Sustainable (GSS) bond issuance hits record highs - a record 3,184 new GSS bonds were issued in 2023, with GSS bonds accounting for a massive 20% of issuances in Europe. These bonds are used to finance environmental or social projects, like new wind farms.

  • Barclays pledged to stop directly financing new oil and gas projects - after a group of investors engaged with the bank. The pledge only stops them lending money directly to new oil and gas projects, so they’ll still lend to energy companies (who could use it to fund new oil and gas projects themselves). Progress, but still a long way to go.

  • JP Morgan Asset Management and State Street Global Advisors exit Climate Action 100+ - climate Action 100+ is an investor collaboration aimed at driving the transition to a net zero economy.  The US asset managers joined the initiative in 2020, but disappointingly, won’t be renewing their membership.

  • February '24 on course to break an unprecedented number of heat records - following 9 consecutive months of breaking temperature records since May 2023. The natural El Niño climate pattern can account for some of this, but climate scientists are increasingly concerned at the pace and extent of global temperature rises.

Featured chart

Quarterly Global Sustainable Fund Assets

Bar chart showing the growth of Quarterly Global Sustainable Fund Assets from Q1 2021 to Q4 2023. Europe, the US, and Rest of World contributions are depicted in blue, dark grey, and yellow, respectively. A noticeable increase in total assets, with a peak in Q4 2023.

Source: Morningstar Direct. Data as of December 2023

The chart above shows the total assets held in sustainable funds, which hit an all-time high during Q4 2023 at nearly $3 trillion.  This was mainly driven by a strong recovery in the performance of sustainable assets during Q4 2023, as well as positive inflows into sustainable funds. 

Why’s this worth sharing?

Sustainable investors have been through a challenging period over the last couple of years, but green shoots are appearing. Performance of sustainable portfolios during Q4 2023 and early 2024 has improved strongly, demonstrating what could be in store if inflation continues to come under control. 

This article is for financial professionals only. Any information contained within is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity. Parmenion accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.  

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