In the wake of the Covid-19 pandemic, governments and businesses will focus their attention on rebuilding, including a move to more environmentally sustainable economies.
On a steady upward trajectory over the past few years, green bonds are a growing category of fixed-income securities that raise capital for projects with environmental benefits, such as renewable energy or low-carbon transport.
“The green bond market is growing very quickly,” says Angus Young, senior lecturer and research fellow at Hong Kong Baptist University’s Department of Accountancy and Law, and Centre for Corporate Governance and Financial Policy.
For an investor looking to green bonds, another major question concerns the yields and financial risks they expect to carry.
Apart from large rating agencies, currently investors have limited access to a homogeneous way of evaluating the individual elements of green bonds, which can vary widely by industry.
“Because the fund managers have done the research and can serve as a safeguard against greenwashing, one of the easiest ways for investors to get into green bonds is through investing in green bond funds,” says Young.
Many of the world’s leading political and economic authorities, including former Bank of England governor and United Nations special envoy for climate action and finance, Mark Carney, are estimating as much as US$2 trillion to US$3 trillion-plus of capital will be needed annually for the next 30 years to mitigate the worst climate-related and other environmental scenarios.