The push to ‘green’ the world economy is high on the agenda, as scientists confirm a new record level for carbon dioxide in the atmosphere has been reached.
World leaders are attempting to confront climate change, with President Joe Biden making a speech on the USD2 trillion American Jobs Plan which included major plans to electrify national transport systems and boost electric vehicles last week.
Meanwhile, the UK’s Prince William has also been putting pressure on banks to invest in nature with reforestation and ocean clean-up schemes in a meeting with the IMF and World Bank.
Investor appetite for green investments is skyrocketing. A flurry of sustainable fund launches have taken place this week, with AXA Investment Managers launching a US High Yield Low Carbon Bonds Fund, Amundi bringing a new fixed income strategy Just Transition for Climate to market, and Sarasin & Partners launching the Tomorrow’s World Multi-Asset Fund.
Green bonds are so far attracting the bulk of the investment, leading to the emergence of a so-called “greenium” – meaning that investors are paying higher prices and receiving lower yields on green debt, compared with equivalent non-green bonds.
Mirova, an asset manager focusing on responsible investment, estimates that issuers are selling green bonds with yields around two basis points lower than conventional bonds. According to portfolio managers, this reflects “the fact that demand far outstrips supply” in the current market.
Coalitions to combat climate change are also changing the face of the asset management industry. One industry initiative, Net Zero Asset Managers, now covers a third of global assets under management with signatories including BlackRock, Invesco, and Aviva Investors.
“It is about not just getting the badge at the beginning, but taking the action,” said one of the movement’s directors in an interview with Institutional Asset Manager. “I think there is a mutual understanding that we do need to make sure this has credibility and to have those assurance processes that enable us to make sure that this isn’t a vehicle for greenwashing.”
Madeleine TaylorEditor, Institutional Asset Manager
maddy.taylor@globalfundmedia.com