US investors are getting demanding when it comes to green-bond sales as they become increasingly wary of greenwashing, according to the second largest issuer of US corporate bonds among telecom companies.
Verizon Communications Inc. has issued a $1 billion green bond every year since it first tapped the market in 2019, and is noting a clear change in attitude among investors.
“The US has really brought itself up to speed,” said James Gowen, the company’s senior vice president of global supply chain and chief sustainability officer. “They’re asking all the right questions. From our first one to our fourth one, it’s night and day from a market perspective.”
At this year’s sale of a 30-year bond, one of the longest maturities from a green corporate issuer, large US institutional investors inquired about the use of the proceeds, a second party opinion and the firm’s renewable-energy investments, Gowen said in an interview. Such questions were mostly asked by European investors when Verizon issued its first green bonds in 2019.
Global green-bond sales this year through Wednesday total about $276 billion, 4.2% less than at the same point last year. The market is now worth about $4 trillion and investors are ratcheting up scrutiny, spooked by rising cases of greenwashing, where firms slap on eco-friendly branding as a public-relations exercise.
Younger investors, who prefer socially responsible investments, are driving the demand for bonds linked to environmental, social and governance projects, Gowen said. And these investors demand accountability.
“It’s coming down to transparency,” he said. “It’s coming down to, ‘do you have the data? Can you validate your data?’
ESG investing is still nascent in the US compared to Europe, which presents a “tremendous amount of opportunity and a tremendous amount of potential,” according to Gowen. As regulators look to develop rules to protect investors from greenwashing, standardized data can go a long way to winning trust, he said.
“We’ve got to find a way to report these metrics in one way globally or we’re going to keep running around, with everyone trying to make things up as they go along, and it’s tough to see what’s real and what’s not,” Gowen said.
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As the firm mulls further green-bond issuance, it’s working toward achieving net zero carbon emissions in its operations by 2035, Gowen said. The wireless provider is hoping that half of its total annual electricity consumption will be backed by renewable energy in the next three years.
“We’re going to continue to move in that direction,” he said. “To do that, I am going to have to continue to invest in green energy.”
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