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ESG Bonds Get Dinged for Soft Targets, Morgan Stanley Says

  • Well-structured sustainbility-linked bonds intially outperform
  • Sales of the bonds is at a record, fresh highs seen in 2022
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Bonds that are meant to give companies an incentive to do the right thing usually notch the most price gains when they force corporations to meet rigorous targets and charge a relatively high penalty for failing to do so. 

At least, that’s true for the 30 days or so after the securities known as sustainability-linked bonds are first sold, according to Morgan Stanley strategists. After that, investors tend to differentiate less among bonds that might encourage companies to behave well and those that don’t, strategists including Carolyn Campbell wrote in a note Thursday.