Introduction

 

The United States (US) is the most powerful economy in the world. It is the country where many trends regarding governance start and later on spread to other democracies around the world. Therefore, the US government must embrace the ESG values on all levels. The push from federal and local governments is often needed for private-owned companies to advance in the right direction. As for the American financial sector, the municipal debt market is one of the crucial advocates of sustainable, social, and green debt.

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Development of ESG Values in the United States

 

Until 2021 the American government’s activity in the environmental, social, and governance (ESG) spheres were still developing. The progress had to be made mainly through states and cities, as well as investors and corporations. For instance, California introduced a bill demanding publicly-traded companies to have at least one woman on the board. During the same period, Chicago announced that it would integrate sustainability issues into the management of the city’s treasury assets.

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Since 2021 the American government has put a lot more respect towards the benefits of institutions and solving issues surrounding the environment as well as the social and corporate fields. The Biden Administration quickly initiated implementing ESG values on the federal level. For instance, President Biden issued an executive order that demanded the federal government to fight climate pollution in all sectors of the economy. Shortly after, the country rejoined the Paris Agreement to show its support toward the green future. Notably, the US Securities and Exchange Commission (SEC) also announced its commitment towards the sustainable future and ESG values through creating a Climate and ESG Task Force in the Division of Enforcement. Other institutions involved in the promotion of the ESG qualities are the Financial Stability Oversight Council, the Treasury, and the Federal Reserve Board.

 

At the same time, states and cities continued to work together so the implementation of ESG-related regulations could go as smoothly as possible. Many states have decided to follow the ESG guidelines and enhance diversity on their boards. Furthermore, states including California, New York, Illinois, and others implemented regulations in their pension systems to encourage sustainable investments. Both federal and state agencies agreed to work together on issues concerning the environment, work safety, discrimination and harassment, labor, and much more.

 

As mentioned in previous articles, ESG strategies work best when present on all levels and can thoroughly penetrate the system. Figure 2 shows different levels of implementation, starting from local administrations to government enterprises and agencies to non-profit and private entities. It also provides examples of institutions from every group that is capable of embracing ESG values. Cooperation between federal, state, and city governments should be further encouraged.
 

ESG Values and the US Debt Market
 

One of the sectors that is particularly enthusiastic about the ESG qualities is the debt market. From the report published by S&P Global Ratings in February 2021, we can learn how the municipal market embraces the ESG values. One of the most crucial parts of the growth in urban areas is sustainable debt. The agency estimated that throughout 2021 green-labeled debt would continue expanding its market share. Moreover, it is expected for the transportation, education, and affordable housing sectors to remain the key drivers in green financing.

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The United States has a long history of green financing and investment. The Commonwealth of Massachusetts issued the first municipal green bond in 2013. Since that time, the cumulative issuance is believed to exceed the worth of $100 billion. The percentage of green-labeled bonds in the US has been steadily increasing, and in 2020 it reached 5.8%. Interestingly, the top 10 issuers accounted for 65% of the green-labeled debt issued in this market. However, in the future, more diversification is expected. New York MTA, Los Angeles County Metropolitan Transportation Authority, and Power Authority of the State of New York remain on the top.

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In the minds of the analysts, it is clear that sustainable debt is here to stay. Projections state that more issuers will enter the market, as well as the investors’ demand for information to support ESG investing goals will increase. With time the volatility of this sector is also projected to decrease.
 

Conclusions
 

To summarize, during Donald Trump’s presidency, the US did not embrace the ESG values enough from the federal level. Despite that, many states and cities worked together to ensure that sustainable growth would persist. The situation changed after Joe Biden was elected to office. The country showed that sustainability could spread from the highest level to states and cities. Moreover, all levels of governance can work together to achieve a green future.

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