While environmental, social and governance investment considerations have grown around the globe, the U.S. municipal securities market is just beginning to delve into the space in varying degrees.
Market participants from the world's largest asset managers to ratings agencies to technology and data providers to state and local government issuers themselves are focusing on ESG — climate change, social justice and green bonds. .
But incorporating ESG into the municipal industry is complex and the opinions on how to or even whether to take part vary to a large degree depending on the vantage point from where that participant sits. How various participants navigate ESG in the municipal industry is made more difficult by the $4 trillion, 55,000-issuer, geographically and culturally diverse marketplace itself.
Key findings:
- More than half of respondents, 56%, rate ESG as important to the municipal industry with the greatest importance placed on the environmental aspect at 73%, followed by governance at 60% and social at 50%. Issuers place greater value on governance.
- Two-thirds of respondents, 66%, see ESG as an accelerant for municipal industry growth and 56% see it as a catalyst for foreign investor interest in the space.
- While just 42% say it is important for rating agencies to take ESG into consideration for ratings, two-thirds say it is very important or critical for issuers to disclose ESG risks and opportunities in their disclosures.
- A large majority, 77% of respondents, believe there should be a universal “language” for ESG in the municipal space.