TEF Telefonica SA

   By Colin Kellaher 
 

Global telecommunications companies appear to have found a new funding source--the environmental, social and governance, or ESG, sector, Fitch Ratings said Thursday.

The agency said Verizon Communications Inc.'s (VZ) sale of $1 billion in green bonds this week, which followed last month's issue by Spain's Telefonica S.A. (TEF), could be the start of a trend among telecoms. Telefonica said its sale of 1 billion euros ($1.14) in bonds marked the first green issuance in the telecommunications sector.

There are about $484 billion of green bonds outstanding, including roughly $167 billion sold last year, according to Climate Bonds Initiative, a London-based not-for-profit that acts as a de facto watchdog for the market.

Investors now consider ESG factors across $12 trillion of professionally managed assets, a 38% increase since 2016, with climate change/carbon being a top issue, Fitch said, citing a report from the Forum for Sustainable & Responsible Investment.

Fitch said green bonds don't have socially responsible or governance characteristics, but said they are typically used to fund projects with environmental or climate benefits.

The ratings agency said issuances of green bonds may help companies diversify their funding sources by appealing to the growing market of ESG investors. Fitch also noted, however, that ESG risks generally have a low level of direct impact on corporate credit ratings due the agency's integrated scoring system.

Write to Colin Kellaher at colin.kellaher@wsj.com

(END) Dow Jones Newswires

February 07, 2019 12:26 ET (17:26 GMT)

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