ESG Investor Perspectives Survey
By: Bridget Realmuto LaPerla
November 21, 2022 - 3 minutes 30 seconds
At the start of 2022 issuers and investors were navigating volatile markets: rising interest rates, inflation, supply chains still recovering from the impacts of COVID, and implications from Russia's invasion of Ukraine. During this period, TD Securities conducted a Sustainable Debt Market Investor Survey to better understand institutional investor perspectives on sustainable fixed income products, and the factors driving their investment decisions. TD Securities' ESG Solutions team designed and managed the analysis of the survey results. The survey is based on conversations and research to answer persistent questions from issuers. TD Securities' sales force distributed this inaugural survey to a global investor base, primarily in the Fixed Income space, between April and May 2022.
Survey results are drawn from 36 global institutional investors, spanning North America, Europe, and Asia, representing more than $6 trillion of Assets Under Management (AUM).
Survey results are drawn from 36 global institutional investors, spanning North America, Europe, and Asia, representing more than $6 trillion of Assets Under Management (AUM).
Key Findings
- Use of proceeds bonds remain the debt instrument of choice, with about 80% of respondents declaring the inclusion of green, social, and sustainability bonds in their ESG mandates. This preference overshadowed sustainability-linked bonds ("SLBs"), which only 60% of investors surveyed included in their ESG mandates. In line with this finding, use of proceeds bonds dominated the sustainable debt market in H1 2021 and 2022, with the exception of transition bonds where issuance remained limited.
- When evaluating ESG-labelled bonds, investors noted the importance of having Frameworks with a Second-Party Opinion (SPO) (28% of respondents), followed by an issuer's sustainability strategy / target (25%), and ESG ratings (22%). This highlights the importance of issuers implementing frameworks and communicating sustainability strategies.
- Regional investor preferences were seen through the inclusion of natural gas or nuclear in green bonds, noting European (ex-German) investors requiring additional due diligence.
- While some Multilateral Development Banks (MDBs) may view themselves as pure players, 70% of survey respondents do not and instead insist that these issuers require labelling or further due diligence.
- Investors exhibit regional differences on SLB structuring characteristics, with North American investors expressing a preference for linking Key Performance Indicator ("KPI") weight to materiality and bigger step-ups.
To read more about our survey findings, read our full Institutional Investor Perspectives report.
Director, ESG Solutions, TD Securities
Director, ESG Solutions, TD Securities
Director, ESG Solutions, TD Securities
