Green bonds, once characterized as novelty investments, are now an integral part of institutional investors’ core fixed-income portfolios and represent the entire investment chain, ranging from corporate to municipal bonds and sovereign bonds.
Fixed-income securities that use their proceeds toward the financing of ESG-aligned projects have proven particularly attractive among investors. Their volume has been increasing exponentially since their inception by the European Investment Bank (EIB) in 2007 and following their expansion by the International Finance Corporation (IFC) in 2010.
For this special issue, we looked for articles that explore the extent to which sustainability-linked and ESG-aligned fixed-income securities can support the mainstreaming of responsible investment principles across the financial sector.
Whether green bonds deliver a cheaper cost of capital to issuers than vanilla bonds has been a contentious issue since the start of the green bond market. Among green bond market participants, perspectives on a greenium rest on market positions. On the issuer side, green bond issuers claim to be beyond, and others claim to be at par. As the market has developed, commentary on the investment side has changed. Some investors are arguing that they are investing in green bonds at par with vanilla bonds, while others say that they give financial preference to green bonds.
The price of a green bond depends on the rates of return of projects as well as on the ratings by issuers. That is why it is important to understand what projects are financed using green bonds and who the issuers are.
Climate finance is the mobilization of public and private capital toward climate mitigation and adaptation. Green bonds are one of a growing number of financial products used to facilitate climate finance investments. The green bond market has grown rapidly since the European Investment Bank’s inaugural issue in 2007.
It was a great discussion on various research methodologies for green bonds. . . . While it was quite interesting to know that private equity and venture capital can be sources of finance, it is also imperative to recognize other stakeholders in this value chain for the purpose of meeting the UNFCCC’s annual $100 billion investment target.
Tony Lent, MBA Co-Managing Partner, Aldwych Environmental and Renewables Group This past December, 196 governments signed on to a global climate agreement in Paris. One of the surprises of the conference was the strong turnout of major corporations and asset owners making public their commitment to address climate within their remits. The government plans that were agreed …