With the growing importance of environmental, social and governance (ESG), many investors will be aware of the need to consider those factors when making their equity allocations.
However, they may have less knowledge of how their bonds can contribute as many large-scale sustainable projects will be funded through debt issued by bond issuers.
The easiest way for investors to access this in their portfolios is via holding sustainable or green bonds which aim to have positive environmental benefits and have grown to be a trillion-dollar market.
According to HSBC’s global research report ‘Green Bond Insights’ the overall green bond market exceeded US$1 trillion ($1.35 trillion).
Green bond supply (year to date) was US$196.8 billion – just over double the US$93.7 billion for the same period last year.
That is a lot of money at stake – and it’s crucial for building the framework for a green future.
Navindu Katugampola, Morgan Stanley Investment Management global head of sustainability, said fixed income was the natural home for sustainable investing.
“Asset managers are mainly transacting in the primary market rather than secondary, which gives us regular, direct interface with issuers seeking capital, versus equity investors, and the opportunity to engage with issuers to encourage meaningful positive sustainability outcomes,” Katugampola said.
“Many of the sustainability challenges, environmental and...