GREEN bonds are essential to making sure that the EU meets its target for car emission cuts, an investment firm has said, highlighting a point which was made by Abundance Investment at a Treasury select committee last week.
NN Investment Partners (NNIP) has spoken out after it was revealed that road transportation contributed to 21 per cent of the EU’s total CO2 emissions in 2016, with cars alone producing approximately 12 per cent. The EU has pledged to reduce emissions of new passenger cars by more than 50 per cent by 2030, but NNIP has warned that this may not be possible without financing from green bonds.
“If we are to achieve the climate targets set by the Paris Agreement, we will have to change the way we travel,” said Bram Bos, lead portfolio manager for green bonds at NNIP. “As auto manufacturers hold a vast pool of eligible green assets, there is strong potential to finance this transition with green bonds.
“This would greatly enlarge and diversify the green bond space. Sustainability-focused investors would also stand to benefit, as this would lower investment barriers within the green bond universe. In addition, green bonds represent a great investment opportunity, as we’ve found that investors face no additional costs when investing in green bonds. In fact, by investing in green bonds, investors can reduce the carbon footprint of their portfolios without sacrificing liquidity or returns.”
Green bonds have been rising in popularity in the UK in recent years, with a number of crowdfunding and peer-to-peer platforms launching environmentally beneficial bond products. In February 2018, Goji and Prestige-Prime Group teamed up to launch an ISA-eligible green bond; Triodos Crowdfunding offers a series of green bonds; while Abundance Investment’s ethical crowd bonds have funded more than 40 projects since 2012.
Last week, Abundance Investment’s co-founder Bruce Davis told a Treasury select committee of MPs that more should be done to encourage investment in green finance. The hearing followed the publication of a new government study titled ‘Investing in a Better World’, which found that the public want their investments to reflect their values.
“[The survey results] are contrary to what the finance industry has been thinking, that somehow it’s a trade-off between doing good and making profit,” said Davis.
“We are all impact investors and we are trying to raise people’s consciousness so they realise that,” he added. “Investment itself is a political act – you are using it to decide what sort of world you want to see even if you are not conscious of it.”
Earlier this year, a report from S&P Global Ratings predicted that strong market fundamentals and a continuous stream of new issuers and financing instruments may push green issuance to around $180bn (£137bn) in 2019 from a record-high $167bn in 2018.
NNIP said that it is committed to engaging with potential green bond issuers, particularly within emerging sectors.
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