Green bonds are booming

Sales of bonds for environmentally friendly projects set a new record in March. The momentum’s likely to continue given developments like the Biden administration’s $650 billion in funds for clean water and other ESG efforts, George Moriarty reports.

[GM] Welcome to By The Numbers. This month, a look into the numbers behind ESG, and today’s topic is green bonds.

In March, bond sales backing by environmentally friendly projects set a new monthly record. According to Bloomberg data, issuers raised $73.4 billion from green bonds around the world, beating the previous all-time monthly high of $62.3 billion from September 2020. Just shy of $150 billion of green bonds were issued during the first quarter 0f 2021. that’s an increase of 186% from the same three months of 2020 and several signs point to more records coming down the pipe.

First, BlackRock and Vanguard Group recently announced they’ve joined the Net-zero Investment Managers initiative. That’s a group of 73 firms with about $23 trillion of assets under management, and each firm is pledging to fight global warning. Green bonds will be an important way fiduciaries can show their commitment to fighting climate change.

Second, President Biden’s two and a quarter trillion dollar infrastructure plan that was announced earlier this month is set to keep the momentum going. It will fuel private sector issuance of ESG bonds. Biden includes $650 billion in the plan for initiatives that will make water cleaner, bring high-speed broadband to impoverished areas, among other ESG-related projects.

Finally, for their part large investors have been more vocal about supporting ESG causes. And even retail investors increasingly want to know the impact of all their investments, including what projects their fixed income dollars are supporting.

[Tim Coffin] What I think we are seeing more of now is that investors, retail investors and institutional investors, increasingly want to know about the impact of their investments. Both the positive impact and the negative impact. And that doesn’t just mean alignment with values but customization really becomes a key factor. Investors I think will increasingly want to make sure that their portfolio reflects what their priorities are.

[GM] These numbers are great. However, advisers should remain on the look-out for greenwashing, that marketing-driven phenomenon where governments and companies exaggerate or mis-represent their ESG credentials as demand for green bonds soars.

Experts recommend looking for firms with an integrated strategy, stated milestones, and an execution plan toward long-term sustainability.

See also: Green bond market just getting started