Majority of GP Panel shun green bonds

Global – Nearly 80% of the GP panel say they do not plan to invest in green bonds despite changes in the market to make these more accessible to institutional investors.

Last month, Global Pensions reported that opportunities are opening up for investors looking to invest in green bonds as a new certification scheme is due to launch in November.

The Climate Bond Initiative scheme verifies the environmental credentials of green bonds and is due to launch 24 November. The Climate Bonds Standards and Certification will help investors tell the difference between green and non-green assets in different jurisdictions and organisers aim to certify some $300bn of suitable bonds per year.

Climate Bonds Initiative chair, Sean Kidney said: “What the investors that we speak to want to know is the money is really going to the right kind of investor in the context of climate change.”

There is a $300m certified bond coming out this month, with another $200m certified bond expected in early 2013. They are also looking at existing bonds that would comply.

Green bonds are currently issued primarily by the World Bank and the European Investment Bank and allocate the proceeds of the bond offering to fund environmentally beneficial development projects.

Green bond issuances from all multilateral development banks and multilateral financial institutions is estimated to be $12bn, according to figures from State Street Global Advisors (SSgA).

SSgA announced the launch of a green bond strategy last month.

SSgA spokesman, Chris McKnett said: “Green bonds have similar financial features to conventional bonds of the same issuing entity, with the differentiating characteristic being the allocation of proceeds raised by the green bonds to fund or support environmentally beneficial development projects.”

Despite these opportunities, the majority of the panel say they do not plan to invest in green bonds. One panel respondent said: “It is not part of our fiduciary duty to subsidise green investments. We must continue to seek the best risk adjusted returns in this challenging environment.”