WealthDFM | June 2021
BLACKROCK
The Green Bond
Revolution Wealth DFM talks to Blackrock’s Cara Milton-Edwards about why green bonds are becoming increasingly popular as an investment vehicle in the ESG space
WEALTH DFM: IN YOUR ROLE AS A FIXED INCOME PRODUCT STRATEGIST COVERING SUSTAINABLE INVESTING, IN WHICH AREAS ARE YOU SEEING THE MOST INTEREST FROM CLIENTS AT THE MOMENT? CME: I'm in a very privileged position where I talk to many investors about the range of fixed income solutions at BlackRock that incorporate sustainable outcomes. Of those conversations, one of the most regularly touched upon topics is green bonds. This is both from the perspective of how much the market has grown, but also the increased investor demand that we see for this asset class. In terms of the market growth, if we look back to 2015, this was a market that had just $225 billion dollars of outstanding debt. At the end of 2020, that had grown to over a trillion dollars. We've seen huge growth in the market. However, alongside the size of the market, we've also seen an increase in the diversity of issuers.
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I think that is really what has piqued investors’ interest. Ultimately the conversations become about what role can green bonds play within my portfolio.
WEALTH DFM: WHAT ARE THE DEFINING PRINCIPLES OF A GREEN BOND? CME: In some ways it's easier to start by looking at
what a green bond isn’t.
A green bond isn't a bond issued by a green company. A green bond is a financial instrument whose proceeds are exclusively applied to new or existing projects with environmental benefits. When a green bond comes to market through primary issuance, there are four characteristics that have become the market standard. These are known as the Green Bond Principles. These principles are: Use of proceeds: at initial issuance, understanding exactly what that green bond will be funding and ensuring that those projects fall
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