NN Investment Partners (NN IP) has launched a new fund adding to its green bond offering, the NN (L) Sovereign Green Bond fund.
This fund is the first sovereign bond fund aiming to have a positive environmental impact through the projects it finances. It complements NN IP’s existing range of green bond funds, applying the same investment approach as the NN (L) Green Bond fund, but with a specific focus on treasury and government-related bonds.
With the launch of this fund, NN IP offers a full range of green bond funds: aggregate, corporate, sovereign, and an option for a fund with a shorter duration. By offering separate sovereign and corporate green bond funds, investors have maximum flexibility to select the building blocks they need to make their fixed income allocation more sustainable with a measurable and positive impact. The launch of the fund comes just five years after NN IP launched its first dedicated green bond fund and only one year after launching a corporate green bond fund.
Bram Bos, Lead Portfolio Manager Green Bonds at NN Investment Partners, says: “I am proud to be part of the development of an asset class that will play a key role in financing climate change mitigation and supporting the environment. Whilst in the past, investor demand for green bonds mainly came from impact investors, we now see more typical fixed income investors allocating to green bonds as well. These investors are looking to make their portfolio more sustainable without sacrificing financial performance. Offering a broad range of green bond strategies makes this even easier, as it allows them maximum flexibility to allocate to green bonds that replicate the characteristics of traditional bonds in their portfolio.”
The launch of the sovereign green bond fund occurs at a time when the sovereign green bond market has seen significant growth in issuance, representing a diverse issuer base that NN IP believes will continue to grow exponentially. Italy recently issued its inaugural green bond in March whilst Spain the UK have also announced plans to issue their first green bonds in 2021, which will give the sovereign green bond market a further boost. These developments are creating a market that is well-diversified in terms of issuers and countries, which allows for a well-diversified portfolio with comparable characteristics to a regular allocation to treasuries.
NN IP believes global green bond issuance this year could increase by 50 per cent from last year to EUR 400 billion, putting the total market above the EUR 1 trillion mark and expects the global green bond market to grow to EUR 2 trillion by the end of 2023. The announcement from the EU that 30 per cent of the NextGenerationEU bonds (in total EUR800 billion) will be green bonds supports NN IP’s forecast for market growth.
The broad market developments in the green bond space have led to strong investor interest in green bonds, causing the combined assets in NN IP’s green bond strategies and mandates to grow to EUR3.7 billion in only five years. NN IP has a dedicated green bond team of seven experts, combining the expertise of green bond portfolio managers, analysts, and reporting specialists. The combination of AuM and number of dedicated experts make NN IP a global frontrunner in managing green bond strategies.