BondLink launches system to showcase issuer ESG data

BondLink has launched an environmental, social, and governance solution aimed at improving how municipal issuers can highlight how they're addressing current ESG credit risks and showcase their specific green bond programs to investors.

The demand for green and sustainable bonds is growing rapidly around the world. Global sustainable bond issuance is likely to top $1.5 trillion this year, up from $200 billion only four years ago.

Total muni ESG issuance has been growing in recent years. According to Refinitiv/SDC data, total ESG issuance for the first quarter was $2.439 billion. That's down from $4.176 billion in the first quarter of 2021, but total issuance has been down in 2022 due to the market volatility that has defined the year so far.

Total ESG issuance for 2021 was $42.059 billion out of the $476 billion total issuance. In 2015, there was a total of $2 billion of green bonds issued.

Green bond designations continue to account for the majority of ESG municipal issuance, accounting for $19 billion in par volume or 43.6% of ESG issuance last year, per an IHS Markit Municipal team's 2021 Muni ESG Recap report.

“It's a big emphasis,” said Colin MacNaught, CEO and co-founder of BondLink, of ESG. “And it's something that's not going to reverse. We expect this to be the dominant theme in 2022."

MacNaught said BondLink — a software platform designed to help municipal issuers, including state and local governments, optimize their efficiency and show the value of improved financial disclosure — hears every single day from investors they want more information around ESG from issuers.

“We know that issuers already have this information; it's a matter of making it easy for them to get this to investors on a regular basis,” he said.

Investors are demanding more information from issuers on ESG and participants point to a broader investor base for the asset class as a result of ESG. Specific funds dedicated to ESG are growing, including VanEck and State Street and Nuveen have launched sustainable or ESG exchange-traded funds in recent months.

In addition, regulators are getting involved, with the Municipal Securities Rulemaking Board intending to discuss the preliminary themes in the comments it received as part of its request for information on ESG in its first meeting since the comment period closed in March. The board received some criticisms on its efforts from issuers that it is politicizing public finance.

While there is no standard in the space, various participants are working on systems to provide more ESG data.

The BondLink system provides investors with key updates on an ongoing basis, not just at the time of sale, about the projects selected, their progress and any potential impacts.

BondLink’s system includes a centralized website for issuers to share overviews, documents and project updates to market their green and sustainable bond programs. It also has a tagging system that labels information addressing ESG credit factors, making it easier for municipal investors to find, and new opportunities for investors to identify issuers who are reporting ESG credit risks and exhibiting good governance to address the issues, he said.

MacNaught said early feedback has been positive, and clients have used the new feature in different ways. The Connecticut Green Bank is using the ESG communication tool to talk about its green bond framework, while the New York State Housing Finance Agency is talking about its social and sustainable bond programs. The Citizens Energy Group in Indianapolis is using the ESG tool to talk about sustainability, and the Port of Los Angeles is highlighting to investors its environmental sustainability program.

“More and more investors are choosing to invest in socially and environmentally beneficial programs," MacNaught said. "It's up to issuers to respond to that need, and we're trying to do that with our ESG solution,"