The Need for Better ESG Disclosures in Leveraged Finance
- Investors require better ESG disclosure in the high yield market and the leveraged loan market in particular.
- ESG disclosures are no longer a “nice to have.” They are now a business imperative for companies and a regulatory requirement for many investors. In addition to expecting better disclosure from companies, regulators want stronger engagement from the stewards of capital.
- For companies that decline to provide disclosure, there is a real and increasing risk of reduced investor appetite for their bonds.
- PGIM Fixed Income looks at ESG in two related ways, analysing credit risks and opportunities, as well as assessing the environmental and social good of a credit.
- A standardised framework can help guide disclosures. PGIM Fixed Income believes that all companies—public or private—should disclose at least a basic level of ESG information. Private companies are generally lagging behind their public peers when it comes to ESG disclosures.