What are Green Bonds?

Expert opinion

The world is on the brink of a ‘revolution’ in how we solve society’s, businesses’ and financial markets’ toughest problems. The force capable of driving this transformational change - and the next generation of sustainable investing - are green & social impact bonds, bringing a paradigm shift to social impact investing strategies. These investment vehicles will harness entrepreneurship, innovation and capital to power true environmental, social and governance (ESG) solutions.

Green Bonds have become one of the most rapidly moving asset classes. Since the World Bank issued its first Green Bond in 2008, the market has grown steadily, reaching a total volume of more than USD35 bn in 2014 alone. In the same time, the market reached new momentum and moved from the supranational space and now also includes other asset classes such as government agencies, municipalities and corporates.

Green Bonds are conceptually very straightforward: standard fixed income instruments where the proceeds from the offering are applied exclusively towards funding ‘green projects’. Beyond the concept, however, the reality of green bonds becomes rather fuzzy as investors consider restrictions on the use of ‘green bond’ proceeds and the definition of what constitutes a ‘green project’. Ultimately, it’s believed that investments in green infrastructure will be increasingly necessary from both the public and private sectors as environmental sustainability becomes a more important consideration for both social and corporate responsibility. Green Bonds provide a means to unlock private capital flows into projects that support such purposes. Proceeds from corporate Green Bonds are still overwhelmingly used for climate-related projects, but one may in the future hope to see more bonds that take a broader understanding of sustainable development and thus focus more for instance on biodiversity or even social issues, such as Social [Impact] Bonds.

Social Impact Bonds have the potential to generate great benefits in developed as well as developing countries. They can bring significant advances in areas such as reducing prisoner reoffending, caring for children and the elderly, community regeneration, financial inclusion, and supported housing. Social Impact Investments are those that intentionally target specific social objectives along with a financial return and measure the achievement of both. Given that $45 trillion are in mainstream investment funds that have publicly committed to incorporate environmental, social and governance factors into their investment decisions, it would only need a small fraction of this money to start moving into impact investment for it to expand rapidly along the growth path to the mainstream previously taken by venture capital and private equity.

Having delivered numerous successful ESG Investing & CSR events in UK, Europe and Australia since 2010, GTQ International and SI Partners (UK) are proud to announce the “2015 Sustainable & Social Impact Investing Conference” in London. This unique event will bring together issuers, investors, bankers, advisors, and related service providers for insightful and thought provoking debate on the opportunities offered and challenges being faced within the fast growing ‘Green Bonds’ market.

 

For more information and to register online, please visit http://www.gtqinternational.com/index.php/events.html