Does This CDO Come in Green? With ESG Everywhere, Buyers Beware
Banks are placing the hot label on products ranging from capital-relief trades to collateralized loan obligations. Some experts see a bubble.
Illustration: Connor Willumsen for Bloomberg Green
It started with bonds. Now even collateralized debt obligations (CDOs) come in green. From the humble bank loan to a complex swap, there is virtually no corner of finance for which an ESG product hasn’t been created. Experts say investors should tread cautiously.
In less than a decade, ESG—a style of lending and investing that gives the same weight to environmental, social, and governance issues as to traditional metrics such as leverage and cash flows—has moved out of the wings and onto center stage. Wall Street has unleashed engineers and experts on structuring and marketing securities to offer a whole load of new financial products.