The European Securities and Markets Authority’s (ESMA) guidance on the use of sustainability-related terminology in fund names has proven challenging for green, social and sustainability (GSS) bonds, according to sustainability and impact data provider MainStreet Partners. The rules will require all funds with sustainability-related names to align with either the Paris-aligned or Climate Transition Benchmarks. MainStreet’s report revealed that 122 GSS bond funds are struggling to comply with this requirement by adjusting their portfolio positioning, with some facing a potential name change. MainStreet Partners’ report also noted that the GSS bonds market surpassed US$5 trillion in cumulative issuance, with green bonds representing 57% of total GSS bond issuance year-to-date. The utilities sector displayed the highest average green debt ratio, with 39% of its total debt issued in the form of green bonds used to finance energy transition projects. “Record-breaking issuance this year underlines the critical role that GSS bonds play in financing the transition to a greener, more sustainable economy,” said Jaime Diaz-Rio Varez, Research Associate at MainStreet Partners. “For this growth to keep its momentum, it is vital that regulators continue in their mission to create a transparent environment for investors, but also, it is equally important to create a supportive environment for transitioning issuers.”
