Sustainable bonds are increasingly used to fund specific environmental and social projects, and other sustainable activities. The growth of the sustainable bonds market has been underpinned by issuance from central and regional governments, supranational organisations and corporates.
Source: Candriam, Bloomberg© - As at 15/12/2021
The Selection Challenge
In the past, sustainable investing in fixed income was mainly about issuers’ ESG credentials. Sustainable bonds changed that – by offering investors the ability to follow the use of bond proceeds, and monitor outcomes. But here is a challenge for investors – how do you account for bond objectives in your issue selection? Moreover, different types of sustainable bonds often have different types of objectives. While green bonds’ Key Performance Indicators (KPIs) can be quite precise and science-based, social projects tend to use a more subjective assessment criteria. So what should investors do?