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Fixed Income

Green bonds allow investors to combine their financial interests with direct contributions to environmental and climate protection. The green bond market is a rapidly growing segment with high potential. Clarity is ensured through consensus on definitions and a longstanding track record. Ideal access is offered to investors through a combination of professional investment processes, traditional selection criteria, and sustainability aspects.

To be classified as a green bond, the following criteria based on the Green Bond Principles must be satisfied:

  • The capital raised from the bond issue must be utilized to finance or refinance “green” projects (use of proceeds).
    • Issuers must provide a detailed description of their project selection process along with a definition of the project’s purpose and scope (process for project evaluation and selection).
    • Issue proceeds must be managed separately, and this must be verified by an independent auditor (management of proceeds).
  • Issuers must provide a minimum level of transparency, must report at least annually on the progress of their projects, and must regularly provide reports on the use of proceeds (reporting).

How large is the green bond investment universe?

The green bond investment segment is still young but is growing rapidly. In May 2007, the European Investment Bank (EIB) issued the Climate Awareness Bond, the world’s first climate protection bond, which was successfully repaid in 2012. Since then, the market segment has seen very dynamic growth.

Annual green bond issues by sector (in USD bn)

Sources: Credit Suisse, Bloomberg, MSCI ESG, as of end-June 2018

Performance comparison

Performance of the Bloomberg Barclays MSCI Global Green Bond Index compared to that of the broad market since index launch (duration-adjusted)
Source: Bloomberg, as of end-June 2018

Historical performance indications and financial market scenarios are no reliable indicators of future performance.