Bloomberg ‘Misled’ Investors on Green Credentials of Bonds Worth More Than $50 Billion

Bloomberg, one of the world’s biggest providers of financial data, has been accused of misleading investors about the environmental credentials of bonds worth more than $50 billion.

An investigation by Byline Times with the research group Point Source has revealed that the company listed dozens of bonds as raising funds to be used for a “sustainable purpose” when in reality there were no restrictions on how the money could be used – and according to company filing documents, they could fund the daily operations of fossil fuel companies and deforestation-linked beef producers.

Eila Kreivi, a member of the board of directors of the International Capital Market Association (ICMA), which creates international guidelines on bond labelling, said the IMCA defines “sustainable purpose” in this context as “using the proceeds for social projects, green projects, or a mix of the two”.

Despite the “sustainable purpose” use-of-proceeds label used by Bloomberg, original bond documents seen by Byline Times showed there was nothing preventing the funds from being used for environmentally damaging projects such as the expansion of oil and gas fields.

Bloomberg uses a range of labelling systems and disclosures to give investors information about bonds, including classifying some as “green bonds” or “social bonds” as well as listing how bond funds will be spent under a “use of proceeds” category.

The Byline Times investigation relates specifically to the “use of proceeds” labelling in Bloomberg’s financial software system, the ‘Terminal’, not to other designations or labels.

Journalists went through “use of proceeds” data provided by Bloomberg for hundreds of corporate bonds, comparing the information to bond documents provided by the companies issuing the bonds and associated legal firms. 

We identified 55 bonds worth a total of $50.3 billion that Bloomberg listed as raising funds for a “sustainable purpose”, but whose associated bond documents noted no restrictions limiting spending to social or environmental projects.

The bonds were all sustainability-linked (SLBs), a type of bond that has its interest rate linked to environmental targets, but does not usually put restrictions on how the company can spend the funds raised.

They included a $2.3 billion bond issued by Enbridge, a Canadian oil pipeline company, which has operated pipelines that have been the source of millions of gallons of oil spills.

While the bond is listed on Bloomberg as raising funds that will be used for a “sustainable purpose”, the Enbridge SEC filings say the company “does not intend to allocate the net proceeds specifically to projects or business activities meeting environmental or sustainability criteria” or to social projects.

A €1.0 billion bond from Italian oil company Eni, which is in the midst of a multibillion-pound fossil fuel expansion drive, was given the same categorisation by Bloomberg.

This was despite the bond documentation stating that Eni does not intend to allocate the proceeds of the bond specifically to sustainable projects or activities.

This means that, even though the financial product was given the “sustainable purpose” label for its use of proceeds, there is nothing stopping the company from using the funds it raises to develop new oil projects.

The bonds also include $1 billion in debt issued by the beef producer JBS, which has been accused of driving deforestation in the Amazon. Its bond was labelled in the same way, despite company filings noting that the proceeds were not earmarked for sustainable projects.

Commenting on one example identified by Byline Times, David Uzsoki, lead for sustainable finance at the International Institute for Sustainable Development, said: “What Bloomberg is saying here about the ‘use of proceeds’ is wrong and should be corrected.”

He said the information displayed was “not in-line with the issuer’s bond framework” and did not reflect ICMA definitions, which are the “industry standard”.

There has been a sharp rise in the number of investors seeking out sustainable financial products and services in recent years. A record £537 billion flowed into sustainable funds globally in 2021, according to data from Refinitiv.

The Bloomberg labelling suggests some investors may have inadvertently spent part of their ESG budgets on polluting activities when they intended the money to be spent on environmental or social projects.

Alison Schultz, a financial economist at the Tax Justice Network, said the designations risk “exaggerat[ing] the flow of money into sustainable projects by tens of billions of dollars,” making it “much harder for researchers to measure the impact of sustainable finance accurately”.

“Whether you are an investor or a researcher, it is extremely important that we know where these funds are going,” she said.

Sebastien Kirk, chief operating officer and co-founder of financial analytics company GaiaLens, said the way Bloomberg had used the use of proceeds label could “distort academic research as well as leading to mistakes in investment portfolios”.

Dr Fabiola Schneider, a researcher on ESG reporting and climate transition accounting at University College Dublin, said: “This is an error that should be fixed sooner rather than later.”

Schneider, who provides support to the European Commission’s Platform on Sustainable Finance, added: “The labelling of the ‘use of proceeds’ field here as being for a sustainable purpose is out of line with industry standards, and with the bond documentation.

“It is misleading… confusing and should be rectified.”

Patricia Torres, Global Head of Sustainable Finance Solutions at Bloomberg, said in a statement: “We provide transparency to our customers through recognisable icons and detailed field definitions that indicate if a bond is sustainable themed.

“Customers use many data points in combination to identify bonds suitable for their purposes, and we consistently consult with them to ensure we are presenting data in ways that best support their workflows.”

Both Eni and Enbridge said that, though there were no restrictions on how the funds raised by their bonds could be spent, they were structured so that they would be charged a higher interest rate if they did not hit environmental targets.

Eni said: “The sustainability component of the bonds lies in linking their yield to the achievement or non-achievement of objectives related to the energy transition.”

Enbridge said: “Enbridge’s sustainability-linked bonds are explicitly linked to the achievement of material, quantitative and externally-verified performance objectives.”

JBS did not respond to a request for comment.