All involved in responsible investing agree: it has so far made itself felt much less in the bond market than in the equity market.
There, the agreement ends. While many say bond investors are way off the pace set by their equity peers, others believe much more is going on than meets the eye.
According to Eurosif, 51% of the €6.8tr of assets managed according to SRI criteria in Europe are bonds, and another 7% money market products.
That is an awful lot of bonds. Yet most debt capital markets bankers feel this has barely caused a ripple. Most issuers do not include slides on their environmental, social and governance (ESG) performance in marketing presentations, and most investors do not ask questions about it on roadshows.
Even the most enthusiastic supporters of responsible investing admit that, so far, whether a borrower is a good guy from an ESG point of view or a baddie makes no difference to the amount it can raise in bond markets, or to the price. Tobacco companies’ bonds are shunned by a handful of portfolio managers, but not enough for them to notice.
Ask bond bankers about SRI in the bond markets and they immediately think of the nascent market for specially structured ‘green bonds’, where a few billion dollars of paper have been issued, mostly by supranational and state development banks. But this is a drop in the ocean compared to the trillions of SRI-managed bonds.
Why are the SRI bond investors so silent — or so ignored by banks and issuers?
Many reasons are suggested, of which a few are compelling. “In the equity market you are looking for outperformance, alpha,” says Christopher Flensborg, head of sustainable product and product development at SEB in Stockholm. “That’s often the way the SRI funds are sold — this is the next generation, it’s going to be the future. Rightly or not, the gut feeling investors get is, how much does it cost? How much do I have to give up? It’s going to be more volatile, so you need a higher risk-adjusted return. In the bond market, your chance of upside is limited.”
Bond investors are focused on predicting a binary outcome: will the bond be repaid or not? As long as a company’s business model is sustainable for the life of the bond, it matters little to many investors whether it gets involved in scandals, has good or bad governance or beats its peers at reducing its carbon emissions. Anything in the future, beyond the bond’s maturity, is also immaterial.
To an equity investor, however, the secondary market price is all, and anything that could push that up or down, even at the margin, is worth thinking about. Share prices are also driven strongly by expected future performance.
Similarly, shareholders have an explicit voice, however muted, to influence invested companies — officially, they are the owners. Bondholders cannot propose resolutions at the AGM.
| Rating agencies: a missing piece in the puzzle? | ||
| As ESG investing becomes more widespread, calls become more common for standardised ratings to measure performance on these issues, equivalent to credit ratings. In fact, such ratings already exist — MSCI (see page 28) and Vigeo (page 76) are two providers. Some investors also devise their own ratings in house, often taking into account external data or ratings (see Investor Base chapter, page 10). But old hands in the bond market cannot shake off the suspicion that sooner or later, Moody’s, Standard & Poor’s and Fitch will start providing these scores. It would seem a natural extension of their skillsets, into a growth area. However, Michael Wilkins, who coordinates an inter-disciplinary group of analysts at Standard & Poor’s examining environmental finance issues, says that might not be as natural as it might seem. “We have to be mindful that as a credit rating agency we are regulated,” he says. “That prohibits us from doing anything outside the realm of credit analysis.” While S&P Capital IQ and the wider McGraw-Hill Cos do a variety of other activities outside that regulatory ringfence, they might be reluctant for a time to sail close to the wind. Wilkins also believes it is worth asking what investors want environmental ratings for. “Credit ratings are used to gauge the riskiness of investments, primarily their default risk,” he says. “The analysis includes a number of sub-factors. Environmental factors are undeniably one of them, but if you strip them out [and examine them alone], how is it going to help you assess default risk?” Arguably the whole point of ESG investing is to examine factors that traditional credit analysis leaves out or minimises. This may be worthwhile from a purely financial point of view, or it may not. The investor’s view on that question is individual, and part of its value-added. But S&P’s mandate is clear — to assess risks that it believes are financially material, within its time horizon for ratings of about three to five years for investment grade issuers and two to three for high yield ones.
The drying of East Anglia As part of that, the environmental finance team has put out a number of reports in recent years, covering issues from water risk in eastern England to carbon exposure for the utility and aviation sectors and the US chemical industry. “Ratings are forward-looking, so we have to analyse potential risk scenarios, depending on how likely they are to come about,” Wilkins says. So far, the closest S&P came to changing any ratings based on this research was about two years ago when it looked like the EU Emissions Trading Scheme might prove a headache to companies. But carbon prices have since fallen and some of the terms of the ETS have been eased, so the financial threat has ebbed. In March, S&P published a report in collaboration with Carbon Tracker, an NGO, that looked at the hot topic of carbon stranded assets. This is the belief that if carbon control legislation is brought in, consistent with the global warming targets that governments have already signed up to, then oil companies may not be able to burn all the fossil fuels they already own underground. Again, S&P’s analysis found no rating changes were warranted yet, but in the sample of companies it looked at — three Canadian oil sands companies plus BP and Shell — it did foresee weakening credit metrics. The research is an interesting example of the borderline where ESG factors verge into mainstream financial ones, which the market, and conventional credit analysts like rating agencies, will begin to price in without special ESG tools. In November 2012 S&P also adopted a new, refined methodology for assessing management and governance. “If we score an issuer fair or above, it won’t have a positive impact on its rating,” says Wilkins, “but if it’s poor it could have a downward impact.” CommonWealth Reit in the US was downgraded to junk in June partly because of a weak governance assessment. In July, Polish vodka maker Central European Distribution Corp had its rating withdrawn when S&P decided it was no longer supplying reliable financial information. The rating was already D for default. Wilkins is now working on developing a new methodology for environmental risks, trying to assess which are material for different kinds of issuer. Perhaps S&P is doing ESG ratings after all — though just as an input to its credit ratings. |
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Can-do attitude
That is the bear case against responsible investing having much influence in the bond market.
But many object vehemently to it. “I met a lot of institutional investors in Australia telling me awareness of ESG issues was lower in the bond market,” says Antoine Sorange, head of extrafinancial analysis at Amundi in Paris. “I don’t agree. I think I managed to convince them that we could do SRI also on the bond side. Our ESG analysis is very linked to the financial performance of the company. If you believe so, you must think it can be linked to bonds.”
Amundi uses ESG criteria to screen every security it buys, including bonds. Its dedicated SRI funds, about 9% of its total assets or €66bn, hold 49% bonds, 38% money market instruments and only 11% equities.
Suzanne Buchta, managing director of green DCM Americas at Bank of America Merrill Lynch, agrees. “Investors have been applying ESG metrics in at least some of their equity funds for five-plus years now, starting with negative screening and moving towards positive screening or best-in-class,” she says. “There’s no reason why you can’t roll out that approach across fixed income.”
All the leading French investors are doing this now, Buchta says, and some are doing the same or at least moving in that direction in Germany, the Netherlands and Switzerland. “In the US there are some smaller SRI fixed income funds like Trillium, Pax World and Walden, but ESG has not really taken hold at some of the larger asset managers as a complete approach to fixed income investing,” she says.
Leverage over issuers
Market participants are divided, too, on how responsible bond investing will evolve. Some see it as always likely to lag the equity market, while others say bond investors have reason to care as much as, or even more than shareholders.
“When you’re a bondholder or make a private loan, unless you gear it or trade in and out, your upside is largely capped at the contractual rate,” says Mike Ramsay, head of the credit team at Generation Investment Management in London. “If you can get any information before you invest that gives you a higher or lower conviction that you’re going to get repaid, it’s highly relevant.”
Julia Hoggett, responsible for EMEA green DCM at Bank of America Merrill Lynch, says: “Bond markets provide more long term capital to companies and institutions than shareholders, and it does not seem unreasonable to me to posit the view that the bond markets have at least as much right to be vocal in their expectations of issuers as the equity markets have more standardly been.”
Debt investors also arguably even have more clout with issuers than shareholders, because borrowers have to go back to them regularly asking for more money.
Fund managers get interested
Little by little, bondholders are starting to realise their power. The UN Principles for Responsible Investment runs working groups on a range of topics, and by far the biggest are those for fixed income. Separate groups for corporate and sovereign bonds each have over 40 members.
Sarbjit Nahal, global head of thematic investing strategy at Bank of America Merrill Lynch Global Research, publishes with his sales colleagues a daily roundup of coverage from the bank’s hundreds of equity research analysts that touches on secular trends like water shortage or obesity. Now, about 10% of the email recipients are bond investors — a sign that they are not just mechanically obeying an SRI screening process, but actively looking for trade ideas that could help them outperform.
Issuers like the supranational and national development banks, which as public sector bodies long ago adopted thorough ESG policies governing every aspect of their operations, will be more than ready when bond investors begin to clamour for information.
Listed heavy industrial companies that are in the public eye, like Electricité de France and Enel, had the same experience when shareholders, and now bondholders, started to push them on ESG. Their reaction was “what took you so long?”
ESG ratings are here
For many borrowers further down the awareness curve, it may come as a shock that investors are starting to judge them on ESG measures as well as financial ones.
They need to wake up and smell the Fairtrade coffee. The idea that borrowers could one day announce a bond stating their Moody’s, Standard & Poor’s and Fitch ratings, and also an ESG rating from, say, Vigeo, is still beyond the horizon.
But those ratings are already here. MSCI, the US indexing group, has had a highly organised system of ESG ratings for 10 years, which grades over 5,000 corporate and government issuers on a scale from AAA to CCC.
The ratings do not attempt to compare organisations of different kinds on, for example, carbon emissions. They are done sector by sector, so investors can spot the better performers within, say, the mining industry.
MSCI also flags up controversies that companies get involved in and offers a complete set of screens for undesirable industries or countries.
In June, MSCI and Barclays launched an extensive suite of global, euro, US and sterling fixed income indices that incorporate ESG analysis in three ways: thematic exclusions; sustainability, where only BBB or better rated issuers are admitted; and an ESG-weighted approach.
The analytical toolkit for SRI bond investing, in other words, is not a work in progress — it already exists. Besides MSCI there are other analytics providers, and an ever-growing wealth of raw sustainability information is available from initiatives like the Carbon Disclosure Project.
Wallet love
The groundswell towards responsible investing is such that bond markets are likely to feel its effect more clearly quite soon. That process will happen faster if investors become convinced ESG-driven investing is more profitable.
Specialist investors like Generation and Pax World definitely believe sustainability-driven investing can help them outperform in fixed income, as in equity. But so far, the evidence for big, diverse portfolios like those of most mainstream asset managers is limited.
Amundi has done some backtesting. “The conclusion is that ESG criteria are really starting to bring added value on the equity side, mainly in Europe and Asia, so these portfolios are outperforming their benchmarks,” Sorange says. “On the bond side the results are neutral. Taking into account ESG criteria doesn’t bring added value, but doesn’t destroy the performance. That’s good news, because many asset managers believe it makes portfolios underperform.”
MSCI calculations for 2007-12 also suggest that ESG-influenced bond investing strategies would have slightly underperformed benchmarks in some cases, slightly outperformed in others.
There may be a chicken and egg effect. Bonds of ESG-savvy companies may not yet be outperforming because not enough investors are seeking them out. In the equity world, it is the governance part of ESG that produces most outperformance, Sorange says — either because it is the most genuinely valuable, or because it is appreciated by the largest number of investors.
But sustainability-driven investors are prepared to play the long game — waiting until climate change and other megatrends really start to change the economic landscape.
“Over time, arguably a virtuous circle [of ESG performance] would be reflected in the marketplace,” says Joe Keefe, CEO of Pax World Management in New Hampshire. “It plays out on the fixed income side, too — not only would share prices reflect that, but companies’ ability to raise capital in the bond market.”
| Uridashi: a market that ‘gets’ green bonds | ||
| Japanese retail investors buying bonds in South African rand or New Zealand dollars may not dream that they are being talked about by investment bankers in London and New York — or written about by EuroWeek. They probably don’t care, either — what they want is a nice coupon on a two or three year Uridashi bond from a safe issuer. But they do care that their money is going to a good cause. When the International Finance Facility for Immunisation, which raises debt to fund vaccinations in developing countries backed by national aid pledges, needed to issue its second bond, 18 months after its inaugural $1bn issue in 2006, it turned to Japan. “We did it because of some positive investor dialogue we’d had, leading up to that,” says Vince Purton, head of debt capital markets at Daiwa Capital Markets Europe in London. “IFFIm was a supranational, so it seemed a natural fit for the Uridashi market, where the World Bank and others were already present in conventional, plain vanilla format. But IFFIm was a new name, so we thought, why don’t we put a title on the deal and focus people’s attention on the precise mandate of the institution. So we called them Vaccine Bonds.” Daiwa thought that was a good angle to get maximum traction with investors. “Then the whole thing took off — it was prime time news in Japan,” Purton says. “Suddenly investors were asking if any more themed bonds were coming.”
The value of branding This event has a claim to be one of the sources of the green bond river. Branding the bonds made no difference to what they were — yet it helped them sell. That is the concept, at its simplest, of the green bond market so far. “Uridashi investors are attracted by the SRI bonds concept,” says Hidenobu Shirota, head of debt capital markets at Daiwa Securities in Tokyo. “It makes them happier than simply receiving coupon and principal. They can feel their money contributing to something more, especially when they receive information on how the ring-fenced money has been used.” “That’s how it started, then it snowballed,” says Purton. Daiwa’s branch network in Japan, where retail investors can buy Uridashi issues under rigorous rules governing marketing and advice, was soon humming with demand for bonds that offered investors the chance to fund socially desirable projects. “We did a carbon emissions bond with the World Bank at the same time as the The proceeds are ring-fenced to what Purton calls “varying degrees of tension” according to the issuer, and the investors expect to see regular updates on how their money has been spent. Themed Uridashi issues have not replaced ordinary Uridashi sales by the same issuers, Purton argues, and are not priced differently. But they appeal to a slightly different, younger demographic, some of whom might be new investors for the issuer. The Uridashi market has taken a prominent role in the evolution of green bonds partly because it has remained fairly stable through the financial crisis, although investors’ tastes as to currencies and structures change as those exposures rise or fall. The market has therefore afforded supranational, sovereign and agency issuers a fairly reliable cost of funds. “The cost of funding is of course attractive,” says Shirota. “The ¥1,570tr of Japanese individual financial assets cannot be neglected by issuers. It has huge potential.” Japanese issuers, too, are a potential source of deals, though only the Japan International Cooperation Agency has so far issued SRI-type bonds. “The concept of SRI could be considered by many potential Japanese borrowers,” says Shirota. The Uridashi market is also perfectly happy with deals of small size — something that Purton thinks will be useful as the green bond market expands to take in smaller issuers with a more targeted theme. The Uridashi experience also offers a template for a market in which varied labels co-exist without anyone feeling that is a problem — green bonds, water bonds. Without hang-ups about definitions, the Japanese retail investors get it. |
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Fresh direction
Into this responsible bond market waiting to happen has sprung a new and unexpected element — green bonds.
The term itself is misleading, or at least only partially accurate, because the first deal of this kind had nothing to do with the environment, but was for the International Finance Facility for Immunisation.
This ground-breaking initiative, launched in 2005, was based on the idea of using future aid pledged by international governments as backing for bond issues, so enabling money to flow more quickly to the Global Alliance for Vaccines and Immunisation and Vaccine Fund, which aims to immunise over 200m children in developing countries.
Since its first bond issue in 2006, IFFIm has raised $4.5bn for this life-saving work, and in the process inspired a generation of capital markets specialists to think of new ways to use the markets to promote social good.
Social impact bonds (see pages 73-75) are one offshoot; another intellectual child of IFFIm is the gathering wave of green bonds that have been issued by supranational agencies including the World Bank, International Finance Corp and European Investment Bank in the past five years.
Unlike IFFIm, these green bonds are not financing new lending programmes or risks that the issuers would not already be taking on. In that sense, they are not making the same kind of direct contribution to society that IFFIm does.
Yet they are an idea that has captured the attention of the debt capital markets. A very small but growing club of issuers, a knot of investment banks, and parts of the bond investor base are excited about the idea that green bonds could become a substantial market.
The instruments given the green bond name so far — as well as similar deals with agricultural, health and gender themes — have been bonds that from a credit point of view are identical to the normal paper of the large, highly rated borrowers that issue them.
The green or other theme is added because the issuer commits to use the proceeds for a particular purpose, designed to appeal to the investors’ wish to finance green or other socially beneficial activities. Funds can be ringfenced to that end, with regular reporting to investors on how the money is invested.
Issuers get the bug
“It’s hard to pin down why this has suddenly happened at this precise time,” says Vince Purton, head of debt capital markets at Daiwa Capital Markets Europe in London. “I think in part it’s a recognition of how all aspects of life now involve a contemplation of environmental and green issues. Bond markets have been quite slow to pick up on it. Green bonds are in their infancy now, but our view is they have staying power and will become an important segment of the market.”
The issuer base is growing, with the addition this year of the African Development Bank, State of Massachusetts and an expected repeat deal by the Région Île-de-France.
In 2012, Air Liquide issued a €500m bond that it claimed was the first corporate SRI bond.
“The green bond is a very significant addition to the SRI field,” says Mike Eckhart, head of environmental finance at Citigroup in New York. “I think we’ll see two large new pools of issuers — corporates and municipals, issuing bonds and pledging the use of funds for green purposes.”
“If you have five financial institutions and five corporates come to the market with green bonds in the next year, it could easily triple the year after,” says Buchta at BAML. “It could triple again the year after that.”
Green bonds are different from almost every other new product that gets launched in the debt capital markets, because they do not demand anything new of the investor. The bonds carry the full faith and credit of the issuer, so carry no extra risk — nor is there any extra structuring that could affect their risk or return.
Hence the usual process of persuading more and more investors to accept a new product need not take place. They are being offered the extra value of an ethically enhanced investment for nothing.
It is the issuers that need to do extra work, by making arrangements to ringfence the money, report to investors and perhaps have the whole structure verified by a third party. At the moment, this cost is being borne by the issuers.
Why do it?
From a normal economic standpoint, green bonds are paradoxical. They are not causing anything to be financed that would not otherwise be financed; and both the issuer and the investors insist that they are not giving up a basis point of yield, either way — so the same things are being financed at the same yield as they would be with normal bonds. From a hard-nosed point of view, it is not obvious what is gained, by either party or the environment.
Market participants working on green bonds accept that the question “what is the point?” is a fair one. But they all have lots of answers to it.
“These are strategic transactions,” says Navindu Katugampola, vice-president in SSA debt origination at Morgan Stanley in London. “They have diversified the issuers’ investor bases — we’ve seen accounts buying green bonds that haven’t bought other bonds from the issuers. And they can tap broader pools of money within existing investors. Large asset managers can buy them for certain dedicated SRI portfolios.”
The green theme is not so much a key to unlock pools of money previously off-limits to the issuer — but a marketing aid that acts as a powerful attractor of demand from certain kinds of investor.
“We’ve seen a pattern of behaviour with the deals we’ve underwritten,” says Eckhart. “Non-SRI investors are buying green bonds. They are just everyday investors — especially treasurers of US industrial companies that have large amounts of cash. They’re not following a specific green investment policy. They are looking for quality, yield and when you add the green angle they’ll buy it in large quantities.”
Some of these investors had not bought the SSA issuers’ bonds before, perhaps because with their tight yields there was little to attract them.
Other investors in green bonds have included more specialised sustainability-driven investors and mainstream asset managers with an ethical bent, such as the Second AP Fund in Sweden, which started to buy the instruments in 2008.
“The Fund invests in these bonds when the potential return is deemed to be comparable with normal bonds,” says Ulrika Danielson, a spokesperson for AP2. “We continue to be pleased with the investment, because we support projects that respect the environment without sacrificing performance or increasing our credit risk. We are also pleased that this market continues to grow and that there will be different types of issuers that give out this type of bond. For us the investment fits well, because it shares our vision of combating climate change, contributes to the diversification of the portfolio and fits us as a long term investor.”
If investors are getting some extra non-financial value from green bonds, which makes them more eager to buy them, supply and demand would suggest that eventually green bonds should trade tighter than ordinary bonds of the same issuer, were liquidity and other factors the same.
Not giving an inch
So far, investors refuse to countenance the idea of sacrificing yield to buy a green bond — perhaps because that would weaken their claims to their own clients that green investing was as profitable as a mainstream approach.
“For the moment, issuers are prepared to execute green transactions if the cost is flat to their normal funding, even though the exercise involves administrative costs, because of the broader value to the organisation,” says Hoggett at BAML.
Green bonds publicly signal the issuer’s commitment to green issues.
But Hoggett argues that money dedicated to green bond investment will build up. “Over time, it should create a price tension in favour of green bonds, akin to the focus of central banks on SSA bonds,” she says.
One way out of the pricing stand-off between issuers and investors, Purton at Daiwa believes, could be for the market to diversify into deals in a wider range of formats, including private placements.
“For conventional debt, a lot of issuers post tighter levels for off-the-run private placements than they do for a public bond,” he says. “This could be the way this market goes too over time. We might in the future see a range of public and private deals, including reverse enquiry demand, with some deals priced flat to conventional bonds and others maybe targeted at niche investors and getting private placement-type levels.”
Some investors and issuers reject the idea of green bonds, arguing that both sides should direct their efforts to making the whole issuing organisation greener and better governed. This is the principle underlying most organised approaches to responsible investing.
Many market participants also warn that trying to achieve a cut-and-dried definition of ‘green bonds’ as an asset class with official standards is problematic.
Industry norms of good practice in transparency and reporting are desired by all.
But deciding what is green is much more difficult — especially as neither the public, nor goverments, nor scientists agree on it either.
Nuclear power, for example, arguably has lower carbon emissions than fossil fuels, but it carries the risk of a disastrous accident. There is no one right answer to whether nuclear power is ‘green’, and never can be. Investors in France are comfortable with it, Germans less so.
Decisions like these will always remain the province of the investor, just as any decision to invest in a certain company or sector is always an individual credit judgment.
Seeing the bigger picture
But much about the green bond market suggests analysing it in terms of cold financial rationale is not the best way to understand it. Issuers like the World Bank, with its Green Bonds, and European Investment Bank, with its Climate Awareness Bonds, have committed themselves seriously to sustained programmes of issuance, even though they already have ample access to funding in the bond markets.
“The dollar for dollar impact of these deals may yet be very limited,” says Flensborg at SEB. “But if it was just about branding and making everybody feel good the market would never have got to where it is today.”
To get a real ESG bond investing market, Flensborg argues, the asset management industry needs to climb a learning curve. “The bond portfolio managers and analysts have the skills but not the awareness — they are not engaging themselves,” he says. “Creating a dedicated product like green bonds creates awareness. It catches attention and people start thinking about things on a broader scale.”
Bankers involved with green bonds describe how interest has snowballed from investor to investor — and the parallel process among issuers is only too apparent.
This spate of activity, Flensborg believes, is stimulating structural and organisational change within all kinds of institutions. “I’m not only expecting this to happen, I’m seeing it,” he says. “I’m getting questions coming all the way from our chairman, our investors and issuers are getting questions from multiple stakeholders — suddenly people are feeling engaged, and feeling they can do this without going outside their mandates.”
Hoggett at BofAML also makes the point that green bond issuers want to play “a catalytic role in increasing the focus and tools available to finance the current global deficit in environmental spending.”
Green bonds’ value in attracting investors and issuers to the idea of thinking more about ESG issues can also explain the paradox of their being priced identically with ordinary bonds.
“You could try and persuade investors to put their money into an ESG strategy because it was going to outperform, but it would take too long to prove,” says Flensborg. “If you want to attract the 98% of mainstream investment money that is benchmarked, you need to get them started without changing anything. Green bonds are a beta product, they just replace an existing product with an identical one with a dedication to the climate.”
Certainly, the attention SRI issues are now getting from bonds bankers is quite new. Many people who’ve become enthused by the market had previously given barely a thought to sustainable investing. When it was all up to the investors, why should they — commercially speaking?
The creation of an issuer-driven product that investment banks can structure, market and sell has given the banks an active, rather than a passive role in this field, and they are relishing it.
Broad filter, narrow push
The creation of green bonds highlights a distinction between two styles of socially committed investing. One is the filter approach: I own a portfolio of securities, so how can I use that to exert influence in favour of good outcomes? Exclusions, inclusions, best-in-class and engagement strategies all work in this way.
The other is the push approach: I own a certain amount of capital, how can I put it to use in the most concentrated and effective way to further good ends? This approach tends to mean seeking out green or socially positive investments and investing exclusively in them.
Both kinds of investor usually believe they will also make attractive, even market-beating returns in the process. And both styles are valid ways of trying to effect change.
Green bonds can appeal to both kinds of investor, but hold a special attraction for the latter kind. And the issuers getting involved also want to feel they are pushing society’s response to climate change forward.
If the issuance of green bonds by big-name development banks and companies can stimulate knowledge and attract new funds into ESG investing, that could ultimately help humanity respond to climate change and other threats.
As Giles Hutson, head of corporate banking and DCM for continental Europe at BAML, argues, in a classic call to ‘push’ investing: “There is a £200bn spending gap for just the UK to meet its carbon targets by 2050. We are trying to integrate this drive into capital markets. Every dollar allocated to a fund that has renewable parameters is a win.”
When investors who have been drawn into this market by a World Bank or IFC deal start buying debt from lower rated, higher risk borrowers like green infrastructure project companies, which in the past would have found it harder to win finance, then green bonds could really begin to make a difference to sustainability.
