This week in ESG
From soaring temperatures in Europe to solar mega-projects in China, here’s what’s been happening in the world this week.
Key highlights
🔥 European heat warnings – a wave of hot air drifting over from North Africa has led to extreme heat warnings across Western Europe. Power outages and health alerts are expected across the region.
🧱 China’s building a solar wall – the country is looking to build a 400km long, 5km wide, wall of solar panels in the Mongolian desert. Not only will this help power their massive renewables ambition – it’ll also help to provide shade and prevent soil erosion in the area.
✅ Virgin Group’s Net Zero gets approval – Virgin Group’s climate targets have just been approved by the Science Based Targets initiative (SBTi). They’re aiming to halve their direct emissions (scope 1 and 2) by 2030 and hit net zero by 2050 – and this gives a big boost to credibility.
🆕 Slovenia launches a Sustainability-Linked Bond (SLB) – in a first for a European sovereign, Slovenia have issued a SLB, raising €1bn. Unlike traditional green bonds – where use-of-proceeds are tied to a specific project – SLB funds can be invested at the issuers discretion, with interest rates tied to broad ESG goals. In this case, the bond is linked to progress towards the country’s 2030 emissions targets.
✂️ US shelves fund greenwashing rules – the US Securities and Exchange Commission (SEC) announced it's dropping proposed rules designed to improve consistency in ESG funds and reduce greenwashing risk.
Chart spotlight - ESG bonds: what's the story?
Source: M&G Bond Vigilantes; Dealogic, Bloomberg, Barclays Research
The chart above shows how companies are increasingly raising money through Green, Sustainability, and Social (GSS) bonds.
So, what exactly are GSS bonds?
- Green bonds require all capital raised to fund specific environmental projects – think clean energy, sustainable farming, or improving energy efficiency.
- Social bonds must be used for pre-specified social purposes, like building affordable housing or supporting healthcare and education.
- Sustainability bonds contain a mix of these two uses.
Why this matters
Many areas of ESG investing have been struggling to attract inflows in recent years due to a tough economic climate. In contrast, the corporate GSS bond market continues to rapidly expand – hitting almost $380bn of issuance in 2024 alone. And this figure doesn’t even include bonds offered by governments like the UK.
Right now, green bonds dominate, and their issuance is helping to provide targeted finance in areas crucial for our transition to a low carbon economy. And social bonds are growing too – supporting positive change in communities around the world.
Despite the rapid growth in issuance, these types of labelled bonds still only make up a small percent of the total market, and often our bond funds, meaning the opportunity to keep expanding remains. This is a something we’ll continue to monitor going forward.
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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.
