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ESG Investors Getting Trounced in Global Credit Market Rout

  • Sustainable debt has underperformed regular bonds in selloff
  • ESG bonds started out more expensive, got hit by rising rates
ArcelorMittal SA's Reduced Carbon Steel Plant
Photographer: Valeria Mongelli/Bloomberg
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The recent credit market selloff has been particularly hard on sustainable debt, challenging the popular premise that investors can do well and do good at the same time.

A Bloomberg index of environmental, social and governance debt has lagged a global bond benchmark by about 64 basis points over the past year. In Europe, which dominates the $4 trillion market, green corporate bonds have slumped 6.7% so far this year, more than the 6.1% loss for normal debt. China high-grade corporate green bonds underperformed non-green peers in the first quarter while in the U.S., green bonds modestly outperformed like-for-like counterparts, according to Morgan Stanley.