Template-Type: ReDIF-Article 1.0

Author-Name: Laszlo Bokor
Author-Workplace-Name: Hungarian Government Debt Management Agency
Author-Email: bokor.laszlo@akk.hu
Author-Person: pbo347


Title: Regulatory and Market Trends for ESG Bonds and Funds, and Some of the Associated Risks of Sovereigns

Abstract: Promoting the financing of the transition to a sustainable economy is one of today's
key issues. However, access to scarce resources is further complicated by a striking
new phenomenon: both regulators and investors are becoming increasingly "choosy",
as they make their decisions on whom to give money to dependent on circumstances
that go beyond green and scientific aspects. It is therefore no coincidence that an
increasing number of investment funds are obtaining ESG ratings that formulate
exclusion rules for sovereign bonds based on NGO indicators (e.g. civil liberties,
level of corruption). If such criteria become an international standard, a sovereign
that fails to meet them could be threatened with total exclusion from the green/
ESG market. The aim of this essay is to review the regulatory environment and
the market situation through this lens. It is important to note, however, that both
legislation and market preferences are in a quickly evolving, amorphous state, and
thus continuous monitoring of the conditions is essential.

Classification-JEL: G12, G18, G20, G28, G38, K22, K32, Q01, Q50
Keywords: green investment, ESG, regulation, bond, market, sovereign, risk
Pages: 150-179
Volume: 21
Issue: 4
Year: 2022
File-URL: https://en-hitelintezetiszemle.mnb.hu/letoltes/fer-21-4-e1-bokor.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:finrev:v:21:y:2022:i:4:p:150-179