Green bond market: from niche instruments to core bonds
Johann Plé, senior portfolio manager and Rui Li, portfolio manager fixed income at AXA Investment Managers, examine how green bonds have evolved from a niche asset to a key source of portfolio diversification
Green bonds have come a long way since their inception. It’s an asset class that continues to innovate and at circa 2.2trn1, they offer investors a broad range of opportunities.
Green bonds were first introduced to the market to offer a financing tool for issuers to transparently address climate and sustainably projects. They were an innovative, new offering designed to deliver positive environmental impacts and the landmark 2015 Paris Agreement on climate change significantly bolstered demand.
In the decade since, the need for environmentally impactful projects has only grown, as has the willingness of companies and governments to finance them. During the green bond market’s nascent phase, smart energy solutions - renewable energy and energy efficiency projects - dominated the landscape. This made way for transport and building sector projects where decarbonisation is urgently needed.
