Hello fellow followers of What Can You Do. I hope your entrance into the New Year is still going strong and you’re feeling a sense of calm and hope for this unfolding year. I made a promise to myself to stay optimistic this year and look for the opportunities that are presented. With this in mind, I have been researching something called “Green Bonds” which has made me feel even more positive about the changing environment of business to facilitate more harmony between human business and the natural world. When I looked up the economic definition for Green Bonds, I felt immediately disillusioned (!) and excluded by the economic jargon and assumed knowledge of certain financial concepts. So I’m going to break it down into my language, so here’s my definition of Green Bonds; a generous financial loan given to climate-friendly projects that seek to progress towards a greener future. That’s it in a nutshell, however, there is a lot more to unpack, such as how that will impact you? Is this effective? Could this help shape the future?
These Green Bonds are what can be referred to as “Gilts” which are fixed-interest loan securities issued by HM UK government, which is fantastic for any projects that apply, as the interest won’t increase over time – making it a safe and enticing loan.
(Interestingly, “gilt” also refers to a gold-painted leaf, which in this case is quite fitting!)
The gold paint on a Green Bond is their nice tax incentives such as exemption and tax credits which gives them an edge over other taxable bonds. Moreover, Green Bonds are a long-term loan, averaging 10-15 years. Which, as we know, conscientious businesses that plan to make an ecological change don’t happen over-night, they require groundwork and support.
So who exactly is issuing these funds? Well, it’s mostly corporations and governments, “with some from multilateral Development Banks and some asset-backed bonds”. It seems that right now, more than ever, the buyers of these bonds (institutional investors such as pension funds and fund managers) are hungry for Green Bond projects as they have ”increasingly large mandates to purchase Green Bonds” With consumers becoming more educated and concerned about the Planet’s welfare, investors have been keener to put green-friendly projects at the apple of their eye. Due to this, there is a much higher demand than there is supply of Green Bond projects, therefore governments can issue these funds relatively cheaply. I’m happy to say that the UK is particularly interested in investing in these sorts of projects. “The UK coming to the market is going to set an example to other governments on issuing Green Bonds, because at this moment in time – when there are lockdowns and dire economic circumstances – governments can secure quite cheap funding” this is a direct quote from Althea Spinozzi, a Saxo Bank fixed income strategist. So perhaps a lockdown wasn’t the worst thing in the world after all.
However, with any revolutionary movement such as this, there will always be a lag. I found the lag. There is a landslide majority of fund managers who are aware of Climate Change and taking these steps, a poll suggested this was 89 percent. Some of the biggest investment companies, such as BlackRock (the world’s biggest Fund Manager) are promising to be key ‘movers and shakers’ at the front of making radical change. They recently introduced 93 new sustainable solutions in 2020, helping clients allocate US$39 billion to sustainable investment strategies. But there are a few, roughly 49 percent that are not changing their portfolios to the growing concerns. Taimur Hyat, Prudential Investment Management’s Chief Officer was quoted that ‘climate change should be central to funds’ risk assessment and management process.’
Currently, Climate Bonds (which include any bond that helps to seed climate-friendly projects) have an “estimated value of $346bn” Last year alone around £189bn worth of Green Bonds were sold, creating around “3.5 percent of bond issuance globally“. Right now these loans are being bought by institutional investors but “in the Netherlands and South Africa, banks have also offered Green Bonds to individuals; and some fund managers have, using World Green Bonds, created special funds that individuals can invest in.” So maybe further down the line, you, or someone who you know will be able to invest in Green Bonds, making them even more accessible, and giving more people a chance to benefit from this changing world of green business. And it’s not just Green Bonds, “Blue Bonds” are the same concept but applied to preserving and saving oceanic life.
So get excited, I believe we’re about to see a lot more projects emerging that are conscious and climate-concerned. It’s about time that the Ol’ Business World was shaken up. If you know anyone with a project that could benefit, or you, yourself can then get involved in the Green Bond initiative, they’re waiting for your idea!
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“tellus” is a Latin word meaning “Earth” e.g. Tellus Mater the ancient Roman Earth Mother Goddess