This report provides a comprehensive review of the petrochemical industry from a macro, credit specialist, and climate mitigation perspective. The report highlights that out of the top 30 global petrochemical producers, 20 are actively traded in hard currency bond markets, and 13 in the liquid CDS indices. The industry is also significant in terms of direct CO2 emissions and energy demand, making it a crucial industry for bond investors to consider.

ESG issues

The report accentuates the lack of clarity regarding the petrochemical sector’s alignment with environmental objectives. Although the first green bonds emerged in 2020, the report suggests that this alignment has not been entirely successful in convincing investors due to the sector’s negative environmental impact.

Recommendations

The report emphasises that the petrochemical sector is gradually gaining pressure due to negative consumer attitudes and legislative moves worldwide. As the sector faces growing scrutiny and public policy being introduced around the globe on issues such as single-use plastic and circular plastic economy measures, bond investors should be aware of the associated risks.

Regarding the green bond market, the report provides a case study of BASF’s inaugural green bond. The yield BASF received was modest, given the lack of overwhelming demand, which emphasises the need for caution regarding green bond valuation.

In conclusion, investors need to be aware of the risks involved with petrochemical companies due to their impact on the climate, which is a crucial ESG consideration. This report provides concrete evidence that the petrochemical industry is an industry for credit investors to assess critically, particularly with regards to ESG measures such as GHG emissions and climate goals.