POWERED BY MOMENTUM MEDIA
Three steps to improve the green bond market
Green bonds can be a powerful tool for attracting investment in environmental projects, but reforms are needed to promote further growth of the market, argues Colin Purdie, Aviva Investors' Chief Investor Officer, Credit.
Where the world’s biggest pension fund leads, others follow. So global markets paid close attention when Hiro Mizuno, chief investment officer of Japan’s US$1.4 trillion Government Pension Investment Fund (GPIF), expressed scepticism about green bonds. In an interview with the Financial Times in early July, Mizuno said without key reforms the asset class risks becoming “a passing fad”.1
On the face of it, green bonds – debt instruments designed to raise capital for specific, environmentally friendly projects – look like much more than a fad. Since the first green bonds were issued by the World Bank in the late 2000s, the market has grown exponentially. According to estimates from the Climate Bonds Initiative, a not-for-profit organisation, total issuance in 2019 is likely to hit US$250 billion, up from US$3.5 billion in 2012.2
The case for green bonds is easily made. They provide a way for companies and governments to finance projects to combat climate change. They are also a good fit for investors looking to bolster their environmental, social and governance (ESG) credentials. Nevertheless, Mizuno was right to point to fundamental problems that are preventing these bonds from breaking into the mainstream.
References
- World’s top pension fund warns against risk of green-bond ‘fad’, Financial Times, July 2019
- Green bonds: the state of the market 2018, Climate Bonds Initiative, December 2018
AUTHOR
Partner Article
Our partner businesses are invited to pen articles that offer unique insight from within the industry for the benefit of our readers. If you read something you would like to learn more about you can contact our partners direct or we are happy to put you in touch.
Recommended for you
The evolution of financial technology continues accelerating with the emergence of high-speed blockchain networks that e...
Australian property prices are rising again, presenting a compelling opportunity for investors. For the first time in fo...
For the first time in four years, every Australian capital city recorded simultaneous quarterly price growth—fuelle...
Here are three big ideas.We all know that we are standing at the edge of a profound transformation in how financial advi...
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom DFS Mortgage
76.97 3 y p.a(%)
2
Global X 21Shares Bitcoin ETF
76.46 3 y p.a(%)
3
UBS Solactive Global Pure Gold Miners UCITS ETF Dis USD
51.13 3 y p.a(%)
4
Global X GlobalX FANG+ ETF
45.15 3 y p.a(%)
5
Select Baker steel Gold Institutional
43.78 3 y p.a(%)
