Feature


and wind farms, developing cars that do not produce harmful gas emissions or purifying water. But this is part of the problem with green bonds. They only serve one of the three pillars of the envi- ronmental, social and governance (ESG) universe. Yet the market has come a long way since the European Invest- ment Bank issued a climate awareness bond in 2007, which was followed a year later by the World Bank being the first to label a debt product a “green bond”. Before then, investors had few options in the fixed income space to fund the fight against climate change and were left to assess the ESG merits of conventional bonds.


The market has evolved during that time and now green is not the


only option for those looking to build a sustainable fixed income portfolio. There are blue bonds, which fund ocean-based projects, and climate action bonds, which help companies reduce pollution, to choose from. Italian gas company Snam, for example, raised $500m (£384.1m) in early 2019 through a climate action bond to reduce its methane emissions.


Other options include social bonds where $14bn (£11.3bn) was raised in 2018 to fund access to healthcare, education and afforda- ble housing. Sustainable bonds are a hybrid that fund environment and social projects, with $17bn (£13.8bn) put to work through these products in 2018.


February 2020 portfolio institutional roundtable: ESG and fixed income 23


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28