US Wall Street Issues Warning on Green Bond Investments for Image Laundering

(Photo by Reuters)

[Asia Economy Reporter Yujin Cho] Investor caution is growing in Wall Street, USA, regarding so-called 'greenwashing' bonds used by companies to launder their eco-friendly image, the Wall Street Journal (WSJ) reported on the 2nd (local time).

WSJ cited an example where a bond fund manager refused to purchase green bonds issued by JP Morgan.

The reason for rejecting the purchase of these green bonds was that although they complied with Environmental, Social, and Governance (ESG) investment principles, JP Morgan itself has not reduced loans to the fossil fuel industry.

The Journal explained that investors are avoiding green bonds whose issuing companies’ eco-friendly business performance is questionable or have loopholes for the issuers to escape accountability.

Steven Nichols, Head of ESG Capital Markets for the Americas at Bank of America (BoA), said, "Investors are increasingly focusing on how the use of funds raised through bonds aligns with the issuer’s overall sustainability strategy."

Green bonds that allocate part of the proceeds to a company’s routine operations or to refinance debts from previous eco-friendly projects are also being excluded from preferred investments.

Greenwashing is a compound word of 'green' and 'washing,' referring to the act of promoting something as eco-friendly when it is actually far from sustainable management ? essentially 'laundering' an eco-friendly image.

As investment funds flood into ESG-related financial products, greenwashing controversies are also expanding. The causes of greenwashing include insufficient standards or regulations for judging and evaluating ESG compliance and financial companies’ focus on short-term performance.

The Journal reported that for these reasons, financial regulatory authorities in the US and Europe are launching large-scale investigations into greenwashing.

According to the Climate Bonds Initiative, the global issuance of green bonds has surged from $50 billion (approximately 59.039 trillion KRW) in 2015 to a recent $250 billion.

This content was produced with the assistance of AI translation services.