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According to Bloomberg Intelligence, sustainability-related emissions are down 46% this year compared to 2023.
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The data is the latest sign of deteriorating sentiment for ESG investing in general in recent years.
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Other areas of sustainable debt issuance, such as green bonds and social bonds, have fared better.
Sustainability-related bonds saw a sharp slowdown in sales due to a shift in sentiment towards investments based on environmental, social and governance principles.
Companies and governments raised 46% less money this year through the sale of bonds linked to sustainability goals than last year, amounting to $37.6 billion, according to data compiled by Bloomberg Intelligence.
That’s the lowest amount since 2020 and comes as the US has seen zero bond issuance in the space this year, with countries in Asia, Europe, the Middle East and Africa making progress. Emissions in Asia surpassed the US for the first time.
The bonds are not tied to specific projects but to issuers’ ESG goals, such as emission reduction targets or purchases of carbon credits, and represent a market worth $319 billion, the data show.
The decline in bond issuance comes as a result of a broader backlash against ESG and, in particular, difficulties with these types of bonds.
Companies face backlash for “greenwashing,” or using deceptive marketing tactics to make themselves appear more sustainable than they are. There have also been obstacles to accurately tracking progress towards the sustainability targets associated with the bonds.
However, other corners of the debt market associated with ESG goals fare better.
Green bond issuance this year totaled $684.8 billion, closely followed by social bonds at $628.9 billion. Sustainable bonds and sustainability-related loans totaled $244 billion and $226.6 billion, respectively, while green loans totaled $132.9 billion, Bloomberg Intelligence data show.
The decline of the sustainability market comes as investor sentiment towards ESG investing has generally shifted.
A survey by researchers from Stanford University, the Hoover Institution and the Rock Center for Corporate Governance found that Millennial and Gen Z investors in particular show less interest in socially responsible investing than in previous years.
Those who said they were “very concerned about environmental issues” fell to 49% last year, compared to 70% in 2022, while those who said they were “very concerned about social issues” fell to 53% from 65% in 2022.
Younger cohorts are investing earlier than boomers, paying less attention to value investing and focusing more on what assets will provide the best returns.