Barclays to Zurich, investors are anxious to grow green bonds

Barclays to Zurich, investors are anxious to grow green bonds

Barclays building

A major announcement at the U.N. Climate Summit this week came from the world's biggest investors.

Representing $2 trillion in managed assets, some of the world's biggest investors issued a statement that commits them to growing a global Green Bond market that finances climate change solutions.

That's after calling for a price on carbon last week.

According to the statement, "We undertake to work, through bodies like the Climate Bonds Initiative with governments, development institutions, industry, cities, commercial banks, NGOs and others, to grow a large and robust market that makes a real contribution to addressing climate change.

"We, as investors and fiduciaries, understand that we have a responsibility to address threats to the future performance of our investments from climate change as well as a responsibility to secure our clients' savings through sustainable and responsible investments. We believe green bonds can be part of our strategy to accomplish both of these aims."

The statement points to many areas in dire need of investment, such as low carbon energy, water infrastructure and climate-proofing of existing infrastructure. The scale of the task requires mobilizing trillions of dollars of private sector capital as well as public expenditure," said Sean Kidney, CEO of Climate Bonds.

"Gigantic investments are needed. These amounts are investments yielding a return; they are not costs. To provide the necessary capital, we need to activate the world's large debt capital markets. Green bonds and climate bonds are a means to do so," said Erik Jan van Bergen, CIO of ACTIAM (a Dutch institutional investor), who announced it would double climate bond holdings to $1.3 billion by the end of 2015.

They are calling for these facilitating measures:

  • Governments to develop projects that can be financed through bonds.
  • Bond issuers to ensure transparency around how the proceeds will be used and what their impact will be.
  • Experts to develop clear standards for bonds so they are directed to the most critical uses.

Related announcements:

Barclays Bank plans to increase green bond holdings from the current $700 million to $1.6 billion over the next year, by far the largest such investment by a bank.

The California State Treasury not only is investing in green bonds, purchasing $1.1 billion so far, it is issuing its first green bond for $200 million.

The European Investment Bank is the world's largest issuer of green bonds, with $1 billion placed just this month and $4.37 billion this year.

The Zurich Insurance Group, which manages $214 billion in assets, will invest $2 billion in green bonds.

The Overseas Private Investor Corporation issued its first "Green Guaranties," U.S. government-guaranteed certificates of participation that adhere to the Green Bond Principles. Proceeds of $47 million will finance construction of the largest solar PV project in Latin America, Luz del Norte in Chile.

Interest in green bonds has skyrocketed this year, growing from just a few billion in the last few years to $25 billion issued this year alone, and expected to reach $100 billion in 2015. Best of all, they consistently have been oversubscribed.