A lack of appropriate regulation may be one reason why ESG bond issuance has slowed over recent years, and why the premium that investors are willing to pay for ESG bonds over conventional bonds has all but evaporated. We think that improved regulations, central bank easing cycles, and growing emphasis on the green transition will spur a fresh acceleration in ESG bond issuance over the next few years. At the same time, we think that the premium investors are willing to pay for these ESG bonds will remain low.
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