Feature


HOW GREEN IS YOUR BOND?


The sustainable debt market is evolving into new areas, but are investors getting what they have paid for? Mark Dunne reports.


Green bonds come in many shades these days, even blue. They are also available in different flavours, such as sustainable, climate, social and transition. The green finance market has evolved into specialist areas to meet demand with green bond issuance break- ing through the $200bn (£153bn) barrier in October and may have ended 2019 worth almost $250bn (£192bn), the Climate Bonds Initiative predicted early in the fourth quarter. But is a fear of greenwashing putting some investors off using such products to integrate more sustainability into the debt side of their investment portfolio?


The first half of 2019 saw $117.8bn (£89.9bn) raised from green bonds, a 48% improvement on the same period in 2018. Despite


22 February 2020 portfolio institutional roundtable: ESG and fixed income


such a huge rise in the level of investment in these products, the market has a credibility problem in some quarters. Indeed, the market is too small. The UN forecast that $90trn (£69.1trn) needs to be invested to achieve its Sustainable Develop- ment Goals, a blueprint that it hopes will create a world-wide sus- tainable future. Green bonds are a small part of the $100trn (£76.8trn) that the global bond market was worth in 2018 with the World Bank believ- ing that there is only around $500bn (£384.1bn) outstanding in such bonds, or less than 1% of the total bond market. Green bonds finance projects that are designed to help protect our environment. These typically include building solar power parks


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