Skip to content

Green Bonds: An Introduction : Investing with a good green conscious?

The transition to a low-carbon economy involves investing in environmentally friendly assets and projects. One important way to raise the necessary capital is to get public and private investors to buy green bonds.

Investing with a good green conscious?

In 2021, the EU started to channel more funds into sustainable investments. The initiative stems from a report by the Commission’s Sustainable Finance Expert Group in June 2019 and is currently being developed.

In this initiative, the EU aims above all to address the ESG criteria, i.e.:

  • Environment
  • Social
  • Governance.

An EU standard for green bonds will clearly define which assets and projects can receive funding.

The European Investment Bank (EIB) as a global pioneer in green bonds.

After the very first green bond was issued by the European Investment Bank (EIB) in 2007, the market grew slowly at first, but then more and more rapidly. It already amounted to 258 billion US dollars in 2019. It is now the fastest-growing segment of the bond market.

Development of the international green bond market

2007
First Green Bond (EIB, USD 823 million)
2008
First green bond of a region (Nord-Pas-de-Calais, 74 million US dollars)
2012
Total volume of green bonds reaches US$ 3 billion
2013
First green bond with a volume of over 1 billion US dollars (IFC)
2013
First green corporate bond (EDF, US$ 1.9 billion)
2014
Adoption of the Green Bond Principles
2014
First green corporate bond in Asia (ASE, US$300 million)
2015
Total volume of green bonds reaches 38 billion US dollars
2015
Amendment of the Green Bond Principles

But what are green bonds?

Green bonds a variety of impact investing: thematic bonds linked to predefined purposes. Green bonds are fixed-income securities that offer issuers and investors the opportunity to support environmental and climate protection projects.

Looking back at the short history of green bonds, we see that Europe was initially the pioneer. With 45 per cent of the issues, Europe is still proportionally the single most important region. The driving force of the EIB obviously has a significant impact here. However, if we differentiate by country, in 2019, the USA ranked well ahead of China with an issuance volume of USD 51.3 billion and France with USD 30.1 billion.

green bonds graph

The issuers of green bonds are often not so clean at all!

Initially, issuers of green bonds were governmental or purely governmental, including supranational or international organisations. From 2013 onwards, private-sector companies also began to issue green bonds. The volume of private-sector issuers has increased immensely since 2013. “Corporate green bonds” now account for one-third of the total market. These corporate bonds are often issued by companies that initially do not come from green sectors. The market is currently divided as follows:
  • Energy 34 %
  • Real estate 26 %
  • Transport 15-20 %
  • Water 10 %
Private Altersvorsorge - Rentenrechner
Did we spark your interest?
To understand how a private investor can start investing in green bonds schedule a free non-binding consultation with one of our bond experts

So it's all just greenwashing?

In Germany, around 70 % of issuance proceeds were invested in renewable energy and 25 % in real estate in 2019. The main motives for issuing green bonds are the lower cost of capital and reputation-boosting sustainability signals to the public. However, there is also the possibility that a deceptive sustainability façade is being built up, so-called “greenwashing”. With regard to lower capital costs, companies hope to achieve a more favourable credit rating through a better sustainability rating and thus obtain more favourable financing conditions. Or companies hope that investors will be willing to accept lower returns. The result would therefore be a “green bond premium” or “greenium”.

The establishment of standards for green bond issuance.

We are watching the development of the green bond segment very closely!

It is considered essential for impact-oriented investing and thus for green bonds to ensure a high degree of transparency of the investment objectives and to achieve target-oriented use of the funds. Following the publication of the “Green Bond Principles” (GBP) and later the “Climate Bond Standard” (CBS), issuing companies can now obtain a CBS seal. The initiative launched by the EU will also be more comprehensively based on ESG objectives, with an additional focus on human rights.

We are monitoring the development of the green bond segment very precisely

Genève Invest is closely monitoring the development of the green bond segment and supports the establishment of standards for the setting of sustainability targets and for verifying the targeted use of funds from green bonds.

“There is no question that bonds (especially institutional corporate bonds) belong in any well-diversified portfolio!”

Find out why an independent consultant is essential to managing your portfolio

Discover the investment strategies that we have developed for you.

We call you without obligation.

Fill out the form and we will contact you to give you more information.
Fields marked with * are required, other information can help us  improve our proposal.
Genève Invest accepts mandates starting at € 100.000