How are issuers of various ESG-labelled bonds (and none) different?

04 January 2022

Dr Arthur KrebbersHead of Corporate Climate and ESG Capital Markets

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Niceasia Mc PerryCorporate Financing & Risk Solutions

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There’s a lively debate around the wider benefits of issuing sustainability debt, and, indeed, whether those benefits are more for a green (or other ‘use of proceeds’) instrument or a sustainability-linked instrument.

With the European corporate market for both structures having grown rapidly over the past year, we have conducted some initial analysis on this topic. For this purpose, we have utilised the full range of Arabesque S-Ray ESG scores for listed issuers of green, sustainability-linked and conventional bonds. While the sample sizes and period are necessarily limited, our indicative analysis leads to two observations:

Green bonds versus sustainability-linked bonds? Issuers are not that different

As the table (Figure 1) highlights, there is (currently) no statistically significant intrinsic difference in the wider ESG profile of a green or sustainability-linked bond issuer. This suggests that the idea that a typical issuer of sustainability-linked bond (SLB) debt is possibly “less well transitioned” – as they focus their issuance on forward-looking ESG improvements – is not currently proven. Equally, it could make the sustainable finance market more dynamic in the future: today’s SLB issuers could become tomorrow’s green bond issuers and vice versa.

ESG-labelled bond does not necessarily make you an “ESG angel”

One swallow does not make summer, and one green or SLB issuance doesn’t make for a fully-rounded ESG profile. Our sample of sustainability debt issuers actually scores weaker, when compared to conventional bond issuers, on certain scores – most notably environmental management, waste, and occupational health and safety. Some would argue that this reflects a degree of “greenwashing” – certainly it highlights the importance of scrutinising a company’s entire ESG strategy. Equally, however, economies of scale mean that regular sustainable debt issuers tend to have larger, more internationally diversified, and more complex operations – which pose distinct ESG challenges.

We are the first to acknowledge the limitations of this analysis. The sample size is necessarily small and based on one point in time, not considering length of time since the first sustainable debt issuance. As the SLB market advances, subsequent analysis could deal with such limitations. However, it does suggest one should be careful with overarching claims about the merits of a specific ESG debt technology.

Many thanks to our intern Samuel Nejman for his excellent research assistance.

Figure 1: Cross-comparison of corporate issuer types and firm ESG metrics


Green bond issuer


bond issuer




GC Score – Environment







Business Ethics







Environmental Management














Forensic Accounting














Occupational Health & Safety







Training & Development







Resource Use







Environmental Solutions







Based on a Western European sample of 38 companies: 13 GB issuers; 13 SLB issuers; 12 conventional bond issuers.
Differences (last three columns) are the subtraction of the averages of metrics of the mentioned types of bonds.
Averages are in score from 0-100 (higher is better).
The meaning of the metrics are as follows:
t-tests have been conducted on all the data above. One-tailed for sustainable debt issuers vis-à-vis conventional debt issuers based on the hypothesis that this first group scores better; two-tailed for green bond versus SLB bond issuers due to the hypothesis that such issuers score similarly.
Date of observations: 01/10/2021
*p-value ≤ .10
**p-value ≤ .01


GC Score – Environment

Environment sub-score (part of UNGC total score)

Business Ethics

Fair business practices as they relate to issues like corruption, political contributions and anti-trust

Environmental Management

Mechanisms and policies to manage overall environmental performance of the business


Generation of waste and other hazardous output as part of business activities

Forensic Accounting

Overall earnings quality or the degree to which reported earnings properly represent a firm’s financial health


Representation of, and equal opportunity for, women and minorities in the workforce and on the board

Occupational Health & Safety

Workplace-replated health and safety performance

Training & Development

Opportunities and programmes to enable and support learning across employees and the supply chain

Resource Use

Efficient use of energy and other natural resources (incl land and materials)

Environmental Solutions

Environmental impact of products and services, and contribution towards sustainable consumerism

Sources: NatWest, Arabesque S-Ray, Bloomberg


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