Panel discusses benefits of ESG disclosure


Environmental, social, and governance-related disclosure benefits municipal issuers, according to a panel of municipal professionals.

Risks issuers face currently weren’t a consideration 50 years ago, noted Richard Freund, associate director at CDP North America, at a session at The Bond Buyer’s National Outlook Conference Thursday.

Risk is risk and impact is impact, said Freund. Issuers should include ESG in disclosures when it makes sense.

Siebert Williams Shank Senior Vice President Jamiyl Flemming said the ESG label can be an effective marketing tool for bonds.

Providing good ESG disclosure will prevent outside bodies from forcing this sort of disclosure on the industry, said Dave Sanchez, director of the Office of Municipal Securities at the U.S. Securities and Exchange Commission.

While disclosure of ESG factors that affect credit quality is valuable, Jamiyl Flemming, senior vice president at Siebert Williams Shank, said the term can also be used as a marketing tool for bonds.

Many investors want some sort of consideration whether ESG issues are potentially impacting issuers’ credit, said Freund.

“Show me you thought about it,” is the attitude they have. If the answer is “no,” tell investors and they will accept it. If the answer is “yes,” explain how the risk will be mitigated. Not addressing the topic at all worries potential investors who will then turn away, Freund said.

The label has earned some small pricing benefits in the primary market, Flemming said, but it is more commonly beneficial in the secondary market.

Flemming said he’s seen little opposition to the term’s use in the municipal bond world. Rather, he said, issuers are sometimes opposed to feeling mandated to use the term.

Addressing the notion the concept is not financially responsible, Flemming said, hopefully over time data can be collected to show that investing in environmentally friendly things is profitable.

ESG investors always want more information, said Karen Daly, senior managing director at Kroll Bond Rating Agency.

The standardization of the ESG information provided is important, Flemming said. He predicted issuers willsoon include more environmental data in disclosure.

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