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:
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.
Mood Riffs: Civil War in Pakistan? Plus, the Art of Vandalism
Our Video Mood Riffs feature goes beyond the markets to examine social and cultural trends. The new episode explains what Pakistan's stock market trend says about the country's civil war prospects, plus brings you a one-of-a-kind take on why we've seen so many cases of art vandalism lately.
Commodity Prices: After 1 Year of Declines, What’s Next?
Commodity prices and emerging markets tend to move together. Watch our Global Market Perspective contributor Mark Galasiewski walk you through a chart of Invesco DB Commodity Index Tracking Fund (DBC) to show how well it's been following its Elliott wave path.
“One of my favorite Elliott wave patterns”
How many euros does one Swedish krona buy? That's not your everyday question -- unless you're a forex trader. Watch European Short Term Update Editor Murray Gunn walk you through a EUR/SEK chart for some useful insights.