Portfolio analysis

Petrochemicals: Major credits, carbon risks, green bonds

Written by Ulf Erlandsson

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Petrochemical companies play an important role in benchmark credit as well as in terms of climate mitigation. We analyse general bond exposures, as well as a BASF green bond coming out of the sector.

Our review of the petrochemical industry covers joint macro, credit specialist and climate mitigation perspectives. For bond investors, this sector is clearly relevant as most of the largest petrochemical producers are large debt issuers and are actively traded in credit portfolios.

In terms of BASF, it is a leading company within the sector and seems a natural candidate for the sector in terms of testing the grounds in the green bond market. For the BASF bond, the company provides a green bond framework with an external second opinion provided by ISS.

The opinion expresses an alignment of the BASF green bond framework in line with general market standards, as well as a leading relative position of the company within the sector. In general, we note that the chemical industry relies on international credit markets to fund their large investments. The industry has one of the largest climate impacts of all industries and it continues to grow. With its capital intensive, longer-term investment planning, we believe the industry can be a good bellwether on whether recent climate commitments and transition plans are credible or not.

About the author

Ulf Erlandsson

Ulf Erlandsson

Founder, Board member

Dr Ulf Erlandsson founded the Anthropocene Fixed Income Institute and was its first CEO. A pioneer of climate-focused fixed income portfolio management, he was named Environmental Finance’s Bond Personality of the Year 2022.

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