Underwriters favoring
environmental securities. Sept. 29, 2021
![](images/images_09_29_2021/Picture7.jpg)
While many banks have been condemned for contributing to the climate
crisis by helping fossil fuel producers raise cash in debt markets,
the banking industry as a whole is making more money from underwriting
ESG-related bond sales.
Banks have earned about $3.6 billion in fees in 2021 from arranging
sales of bonds advertised as instruments of green, social or
sustainable development for companies, governments and other
organizations, according to data compiled by Bloomberg. That’s more
than double the $1.6 billion banks pocketed so far this year from
issuing debt for fossil-fuel companies.
![](images/images_09_29_2021/Picture4.jpg)
The numbers provide further evidence of
the seemingly unrelenting cascade of money pouring into environmental,
social and governance investing. About $750 billion of ESG-related
bonds have been issued this year, compared with $468 billion during
all of 2020, Bloomberg data show. Whether those bonds actually fund
what they say they fund is another question, given the growing
phenomenon of greenwashing, as industries scramble to mollify
governments and consumers increasingly attuned to the consequences of
climate change.
Analysts say that, when it comes to the banks, they’re just doing what
they do:
follow the money.
“Investment banks are almost always driven by what customers want, and
demand for environmentally-friendly bonds isn’t going to wane anytime
soon,” said Jeff Harte, an analyst at Piper Sandler Cos.
Harte adds there are growing regulatory and political pressures on the
financial industry to do something about the deteriorating state of
the planet, and that’s also providing an
incentive
to participate in ESG.
Jamie Dimon, chief executive
officer of JPMorgan Chase & Co.
Photographer:
Marlene Awaad/Bloomberg
JPMorgan Chase & Co., the world’s
top debt underwriter,
is the No. 1 arranger
of bond sales for the fossil fuel industry. But despite its role in
assisting those companies most responsible for global warming, even
JPMorgan has become more reliant on ESG. Almost 13% of the New
York-based bank’s total bond underwriting business now comes from
issuing ESG-related debt instruments. That’s up from 5% last year, and
just 2% in 2018.
For the first time, JPMorgan is
earning more in total fees from underwriting ESG debt—$223 million so
far in 2021—than it is from arranging bond sales for fossil-fuel
companies—$94 million. By comparison, in 2016 the lender led by CEO
Jamie Dimon pocketed $16 million from ESG sales and $107 million from
fossil-fuel debt sales, Bloomberg data show.
What’s happening at JPMorgan is
mirrored across most of the industry.
Take BNP Paribas SA—the
giant French bank now generates 21% of its overall debt underwriting
fees from ESG, compared with 1% as recently as five years ago.
Among the world’s largest banks,
Paris-based Credit Agricole SA is most focused on ESG, with 31% of the
company’s debt underwriting generated this year coming from that part
of the market. At Citigroup
Inc.,
the number is 11%, but that’s up from 0.5% in 2016.
![](images/images_09_29_2021/Picture5.jpg)
Jamie Dimon,
chief executive officer of JPMorgan Chase & Co.
Photographer:
Marlene Awaad/Bloomberg
JPMorgan Chase & Co., the world’s top debt underwriter,
is the No. 1 arranger
of bond sales for the fossil fuel industry. But despite its role in
assisting those companies most responsible for global warming, even
JPMorgan has become more reliant on ESG. Almost 13% of the New
York-based bank’s total bond underwriting business now comes from
issuing ESG-related debt instruments. That’s up from 5% last year, and
just 2% in 2018.
For the first time, JPMorgan is earning more in total fees from
underwriting ESG debt—$223 million so far in 2021—than it is from
arranging bond sales for fossil-fuel companies—$94 million. By
comparison, in 2016 the lender led by CEO Jamie Dimon pocketed $16
million from ESG sales and $107 million from fossil-fuel debt sales,
Bloomberg data show.
What’s happening at JPMorgan is mirrored across most of the industry.
Take BNP Paribas SA—the
giant French bank now generates 21% of its overall debt underwriting
fees from ESG, compared with 1% as recently as five years ago.
Among the world’s largest banks, Paris-based Credit Agricole SA
is most focused on ESG, with 31% of the company’s debt underwriting
generated this year coming from that part of the market. At Citigroup
Inc.,
the number is 11%, but that’s up from 0.5% in 2016.
![](images/images_09_29_2021/Picture6.jpg)
Mike Mayo
Photographer:
Kholood Eid
Mike Mayo, an analyst at Wells Fargo Securities, said he expects the
numbers will only get bigger. “These are very early days in
facilitating ESG and climate financing,” he said. “In baseball terms,
we are in the first inning.”
Still, even if all that debt was truly funding solid ESG initiatives,
the world would need five
times
more money to address climate disruptions. The banks, Mayo said, are
more than happy to help make that happen.
“The reality is what’s good for the environment and society can also
be good for banks’ profitability,” he said, “and after all, we’re
talking about for-profit institutions here.”
Sustainable finance in brief
|
![](images/images_09_29_2021/Picture%206.jpg)
Photographer: Dado Galdieri/Bloomberg
Photographer: Dado Galdieri/Bloomberg
Bloomberg Green publishes the
ESG-focused newsletter every Wednesday, providing unique insights
on climate-conscious investing.
Like getting the Green Daily newsletter? Subscribe
to Bloomberg.com for unlimited
access to
breaking news on climate and energy, data-driven reporting and
graphics, Bloomberg Green magazine and more.
Green Play Ammonia™, Yielder® NFuel Energy.
Spokane, Washington. 99212
www.exactrix.com
509 995 1879 cell, Pacific.
exactrix@exactrix.com
|