ABN AMRO ESG Investor Survey – 2H 2024

The ESG survey is a collaboration across Financial Markets Research: Larissa Barros Fritz and Sustainable Markets (DCM): Dick Ligthart (Director), Suze Korse (Director) an Filipa Tomás (Associate).

Key take-aways

1 ESG Investor Profile and Behaviour

• Most ESG-dedicated investors manage either Article 8 or Article 9 funds. For Article 9, many conduct an in-depth screening of the issuer’s ESG strategy, but compared to last year’s survey, a higher share of investors say they can only invest in ESG bonds (48% vs. 31% in 2023)

• Green bonds remain the dominant label. More investors can now buy SLBs compared to last year. The share of respondents finding an ESG label suitable for securitizations rose from 49% in 2023 to nearly 80%.

• Most ESG investors apply active strategies in their ESG funds that prioritize returns over ESG impact.

• 60% of respondents don't differentiate between ESG and non-ESG bonds in their non-dedicated ESG funds.

• ICMA remains the key standard in the ESG bond market, followed by the EU Taxonomy. Investors increasingly rely on issuers’ ESG strategies over ESG risk ratings. Also, the presence of decarbonization targets has gained importance over the years, but fewer use SBTi for their target assessment.

• Most investors use MSCI and Sustainalytics ESG ratings. The purpose of using these ratings varies widely, but nearly 70% of our respondents say they use the data as a compliment to their own analysis. Most investors don’t have a specific preference for a particular SPO provider.

• Most investors are willing to accept a greenium, without defining a maximum limit to it.

2 Use of Proceed” ESG Bonds

• Most investors still prefer ESG bonds that come from sectors of traditional green bond issuers. No preference for the number of “use of proceed” categories included in Frameworks.

• Investors are generally indifferent about the presence of a lookback period and the format applied to allocation reports.

• Data quality remains the main issue preventing the growth of the green bond market.

3 Sustainability-Linked Bonds (SLB)

• Investors see the best sectors for SLB issuance as those with few green assets / expenditures. Bonds in ESG format especially as SLBs, are seen as suitable for issuers in transition.

• Investors want SLBs with coupon step-ups over 25bps, but there is no consensus on whether SLB targets should include scope 3 emissions.

• Assessing comparability and ambition of targets still seen as the main challenge for the SLB market.

4 Regulation

• Most investors don’t expect to change the name of their fund due to the ESMA guidelines.

• Investors expect to take different approaches on the EU GBS requirements. Lack of standardization is the main issue of the SFDR.