ESG Municipal Bonds: The Next Sustainable Opportunity



The following content is sponsored by Wells Fargo Asset Management.

ESG Municipal Bonds: The Next Sustainable Opportunity

When you think of sustainable investing, does your mind immediately go to stocks? Sustainable investing may have started in equities, but it’s now expanding into a variety of specialized asset classes—including municipal bonds.

In this infographic from Wells Fargo Asset Management, we highlight the growth of ESG (environmental, social, governance) municipal bonds and how investors can identify them.

A Growing Shift to ESG Bonds

Over the past decade, ESG municipal bond issuances have had a compound annual growth rate (CAGR) of more than 70%.

YearGreen and social municipal bond issuance
2011$164M
2012$237M
2013$332M
2014$2.1B
2015$4.8B
2016$7.8B
2017$11.2B
2018$4.8B
2019$11.7B
2020$19.7B

Source: Morgan Stanley Research, Bloomberg

Issued by state and local governments, these bonds often have a positive impact on society or the environment. For example, ESG municipal bonds can be used for affordable housing or renewable energy.

Which factors are propelling their growth?

  • COVID-19
    Amid pandemic-related volatility, credit rating agencies have highlighted the importance of non-financial risk factors. From April to November 2020, 33% of credit rating actions among U.S. public finance entities were related to ESG. To mitigate risks, a growing number of investors are adopting sustainable strategies.
  • Social movements
    Calls for equity have put a focus on investing in underserved communities, such as those with low-income populations or higher proportions of people of color. ESG municipal bonds (Read more...)