The focus on ESG initiatives worldwide underpinned by legitimate risks and concerns important to market participants has led to an inevitable and exponential rise in volume of green claims made by companies as they attempt to demonstrate sustainability credentials to their stakeholders, according to a report published by S&P Global Ratings on Tuesday.
Sustainable bond issuance including green, social, sustainability and sustainability-linked bonds could now collectively exceed one trillion dollars in 2021.
This growth trajectory is staggering. However, a lack of consistency in instrument labelling and post-issuance disclosure has raised investor fears that sustainability claims made by issuers might be overstated or unreliable -- or what is known in the industry as 'greenwashed.'
"With ESG becoming mainstream, key stakeholders including consumers and investors have started pressuring companies to demonstrate their ESG credentials either through commitments and actions at the corporate level, the products they offer, or the instruments they use for financing," said S&P Global sustainable finance analyst Lori Shapiro.
Regulations and principles could also help mitigate environmental, social and governance (ESG) washing risks, although the road to global harmonisation is long and winding, she said.
