Sustainability performance now included in bond issuer analysis

• Investors are indicating that sustainability performance increasingly makes a difference in their considerations of whether or not to invest in a new bond issue.

• Research reveals that a company’s sustainability performance influences the yields on its bond issues. The better the sustainability rating, the lower the rate issuers have to pay.

• Starting this week, ABN AMRO is including sustainability ratings for bond issuers in its analyses for investors.

Sustainability performance increasingly important

A survey conducted by ABN AMRO at the beginning of this year revealed that 69% of investors see environmental, social and governance (ESG) metrics gaining (sharply) in importance going forwards, with 31% feeling these will remain as important as they were in 2020.

The better the sustainability rating, the lower the yield

In-house research, based on Sustainalytics data among other sources, also suggests a clear link between how highly a company scores on sustainability and the rate it pays for its bond issues. The better the rating, the lower the yield. In other words: investors are typically willing to accept a lower yield on bonds they invest in if the issuing company does well on ESG. Every point lower in terms of the Sustainalytics risk score has a positive effect on a corporate bond’s risk premium.

ESG performance a standard feature of ABN AMRO analysis

ABN AMRO analyses bond issuers to help investors choose which bonds they would like to invest in. In view of the increasing importance of investing in sustainability and given the proven link between sustainability ratings and yields, starting this month ABN AMRO will include sustainability ratings for all companies as a standard feature.