ESG Investing: Fixed Income

ESG is increasingly being incorporated into a variety of fixed income investments. According to an Environmental Finance study, there were more than $1 trillion in green, social, sustainable,  and sustainability-linked (GSSS) bond issuances in 2021 – an increase of nearly 70% from 2020 levels.  These instruments include:

• Green Bonds:  Bonds that finance environmental and climate-related projects. 

• Social Bonds: Bonds that finance projects that achieve positive social outcomes or address a social issue (such as affordable housing, basic infrastructure, and food security).

• Sustainability Bonds: Bonds whose proceeds finance a combination of both green and social projects.

• Sustainability-linked Bonds:  Bonds that are structurally linked to the issuer’s achievement of ESG goals (which will result an adjustments to the bond’s coupon).

PRI has produced an Introduction to Responsible Investment:  Fixed Income to help investors consider ESG issues in connection with fixed income instruments.  It has also issued, along with the CFA Institute, a detailed report on Guidance and Case Studies for ESG Integration: Equities and Fixed Income.