(Bloomberg) -- Ethical-focused debt sales are set to pick up after the US made its biggest financial commitment in history to fight climate change, according to Fitch Group’s sustainability arm.
Nneka Chike-Obi, head of APAC ESG research for Sustainable Fitch, is expecting more debt issuers to take advantage of the tax credits and other financial incentives for clean energy contained in the Inflation Reduction Act, which was signed into law in August by President Joe Biden.
“We certainly see this as supportive to ESG-labeled bond issuance,” she said in an email Wednesday. “The financial incentives from the IRA aim to boost low-carbon economic activities.”
An uptick in dollar-denominated bonds could come from battery producers incentivized to ramp up US production, spurring joint ventures with South Korean and Japanese manufacturers, she said. Municipal issuers could also tap sustainable bond markets in their quest to make public transportation greener, according to Chike-Obi.
Related: Green Bonds Defy September Sales Slowdown to Hit Four-Month High
Fitch also expects a jump in sales of environmentally friendly securitized products, such as green asset-backed securities linked to electric-vehicle loans and green mortgage-backed securities, Chike-Obi said.
Issuance of all kinds of debt -- including securities tied to environmental, social and governance issues -- has slowed this year as central banks increase interest rates to tame inflation. Companies and governments globally have sold just $663.4 billion this year in green, social, sustainability and sustainability-linked bonds, 20.6% less than at the same point last year.
©2022 Bloomberg L.P.
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