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ESG Bonds: Why You Should Expect Exposure of “Greenwashing” to Intensify

The SEC investigates whether some firms behave as “responsibily” as they claim

by Bob Stokes
Updated: May 04, 2021

There's been a boom in what is called "ESG debt." ESG stands for "Environmental, Social and Governance."

These bonds are linked to companies and governments which purport to emphasize high standards in the areas of the environment, social equality and ethical governance. Investors have been gobbling up this type of debt.

Many companies and governments want to tap into this high demand. However, there's a growing concern that some firms are merely paying lip service to so-called responsible behavior.

As Reuters reported (March 4):

The SEC has deployed a 22-person team that will focus on disclosures from public companies related to... funds dedicated to ESG investments.

Bloomberg delved into specifics (March 29):

At the forefront of concerns among a small but growing contingent of bond buyers is greenwashing: the possibility that governments and companies are exaggerating or misrepresenting their environmental credentials... to tap feverish demand, lower borrowing costs and boost their reputation.

Our April Elliott Wave Financial Forecast provided its take as the publication showed this chart and said:

MoralHazard

Over the last five years, sales of so-called green bonds, social bonds and sustainability-linked bonds increased from less than $100 billion to $800 billion in 2020.... It turns out that many companies who proclaim "green" bona fides either invest very small amounts in eco-friendly enterprises or fail to meet the provisions of the bond covenants.... As the decline progresses, more stories of ESG exploitation will surface.

Yes, the mood shift from positive to negative during a financial downturn tends to expose flaws and misbehavior. For example, consider the 2007-2009 subprime meltdown. Before then, when housing prices were rising, hardly anyone paid attention to the behaviors that contributed to the huge of amount of bad mortgage debt. However, when real estate and stocks crashed, a lot of mortgage-market misconduct came to light.

And, speaking of the "decline in progress," our April Financial Forecast also notes:

The first quarter of 2021 was the worst total-return quarter for U.S. Treasuries in 41 years, since 1980.

Elliott wave analysis suggests what is next for the bond market.

You can get that revealing analysis inside our flagship investor package. Just follow the link below to get started.

Gold and Silver Myth: BUSTED!

Here's the myth: Precious metals are perfect hedges against an economic downturn.

Here's what you need to know: The historical data contradicts this widely held belief -- not once or twice -- but repeatedly.

And here's what the historical record also shows: The price patterns of gold and silver do follow the Elliott wave model.

Here at Elliott Wave International, our constant and painstaking review of the Elliott wave model helps us help traders and investors to see what's really driving financial markets.

This often means shining a light on "conventional wisdom."

You will find our Elliott wave analysis of gold, silver, stocks, bonds, the U.S. dollar (and more) inside our flagship investor package.

Follow the link below to get started right away.

See What Predicted Commodities’ Recent Drop

Commodity prices have taken a tumble during the past several days. A financial website says the decline is due to the "China crackdown" and "rising dollar." Yet, Elliott wave analysis foretold of the price drop when commodities were still rallying. Take a look at this chart.

Traders: Don't Look to a Company's Profile; Look to its Price Chart

See the Trader’s Classroom forecast and Elliott wave pattern that anticipated a rally which saw US Steel nearly double in price.

“Everybody’s Getting Rich (and Having Fun) Except Me”

Ever heard of the acronym FOBI? It was coined here at Elliott Wave International and stands for the "fear of being in." Yes, just the opposite of the better-known acronym FOMO (fear of missing out). Here's an explanation.