June 9, 2021
Debt issuers are trying to get in on the momentum behind environmental, social, and governance investing, but investors should be aware that these borrowers don’t always use the money for green purposes.
While more companies have issued green bonds this year, some junk-rated borrowers used the cash to repay debt, finance SPAC deals, and allocate toward other corporate expenses, promising to spend equivalent sums on sustainability in the future, the Wall Street Journal reports.
The so-called green bonds even include fine-print warnings that companies might not fulfill environmental pledges. Lawyers and analysts have warned that money managers are so eager to purchase green-labeled investment products that they are overlooking the potential risk that their investment bonds aren’t as green as they say they are.