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Petrochemicals: Major credits, carbon risks, green bonds

Bauer, Fredric LU orcid ; Tilsted, Joachim Peter LU orcid ; Nielsen, Tobias LU ; Anastasiya, Ostrovnaya and Erlandsson, Ulf LU (2021)
Abstract
We review the petrochemical industry from a joint macro, credit specialist and climate mitigation perspective. The sector carries clear relevance for bond investors, with many of the biggest petrochemical producers also being large debt issuers and being actively traded in credit portfolios. Out of the top 30 global petrochemical producers, 20 are actively traded in hard currency bond markets, and 13 in the liquid CDS indices. Despite this and the sector’s importance in the global economy, it has enjoyed a fairly low-profile role in terms of climate change discussions. This is somewhat surprising given that it is the industrial sector with the highest energy demand and the third largest direct CO2 emitter. This article takes a combined... (More)
We review the petrochemical industry from a joint macro, credit specialist and climate mitigation perspective. The sector carries clear relevance for bond investors, with many of the biggest petrochemical producers also being large debt issuers and being actively traded in credit portfolios. Out of the top 30 global petrochemical producers, 20 are actively traded in hard currency bond markets, and 13 in the liquid CDS indices. Despite this and the sector’s importance in the global economy, it has enjoyed a fairly low-profile role in terms of climate change discussions. This is somewhat surprising given that it is the industrial sector with the highest energy demand and the third largest direct CO2 emitter. This article takes a combined approach to understanding the activities in the sector, the associated greenhouse gas emissions, corporate structures and how the sector is funded through the bond markets, with relevant practical information for portfolio managers and asset allocators. The first green bonds out of the sector came in 2020. We analyse a BASF green bond with relatively lacklustre performance and hypothesize that investors do not seem to be overwhelmed by the petrochemical sector’s attempts to declare environmental alignment. It does appear, however, that BASF’s recently announced increases ambitions gave support to the green bond valuation. (Less)
Please use this url to cite or link to this publication:
author
; ; ; and
organization
publishing date
type
Book/Report
publication status
published
subject
keywords
Petrochemicals, Green bond, Fixed income
pages
13 pages
publisher
Anthropocene Fixed Income Institute
project
Petrochemicals and Climate Change: Mapping Power Structures
language
English
LU publication?
yes
id
f96ca3ce-b503-40ca-888a-9813ba780c3c
alternative location
https://anthropocenefii.org/downloads/AFII_Petrochemicals-Major-credits-carbon-risks-green-bonds.pdf
date added to LUP
2025-04-16 13:27:11
date last changed
2025-04-22 12:16:24
@techreport{f96ca3ce-b503-40ca-888a-9813ba780c3c,
  abstract     = {{We review the petrochemical industry from a joint macro, credit specialist and climate mitigation perspective. The sector carries clear relevance for bond investors, with many of the biggest petrochemical producers also being large debt issuers and being actively traded in credit portfolios. Out of the top 30 global petrochemical producers, 20 are actively traded in hard currency bond markets, and 13 in the liquid CDS indices. Despite this and the sector’s importance in the global economy, it has enjoyed a fairly low-profile role in terms of climate change discussions. This is somewhat surprising given that it is the industrial sector with the highest energy demand and the third largest direct CO2 emitter. This article takes a combined approach to understanding the activities in the sector, the associated greenhouse gas emissions, corporate structures and how the sector is funded through the bond markets, with relevant practical information for portfolio managers and asset allocators. The first green bonds out of the sector came in 2020. We analyse a BASF green bond with relatively lacklustre performance and hypothesize that investors do not seem to be overwhelmed by the petrochemical sector’s attempts to declare environmental alignment. It does appear, however, that BASF’s recently announced increases ambitions gave support to the green bond valuation.}},
  author       = {{Bauer, Fredric and Tilsted, Joachim Peter and Nielsen, Tobias and Anastasiya, Ostrovnaya and Erlandsson, Ulf}},
  institution  = {{Anthropocene Fixed Income Institute}},
  keywords     = {{Petrochemicals; Green bond; Fixed income}},
  language     = {{eng}},
  month        = {{05}},
  title        = {{Petrochemicals: Major credits, carbon risks, green bonds}},
  url          = {{https://lup.lub.lu.se/search/files/217293047/AFII_Petrochemicals-Major-credits-carbon-risks-green-bonds.pdf}},
  year         = {{2021}},
}