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.