Will Investing in Green Bonds Pay Off?

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Aug. 28 (Bloomberg) -- Calvert Investments Portfolio Manager Vishal Khanduja explains what green bonds are and why they could be worth $3 billion in just a few years. He speaks on “Market Makers.” (Source: Bloomberg)

Us from washington to explain.

It is great to talk to you about this topic.

It is an under spoken, underreported environment.

These bonds have really picked up steam in the last 12-18 months.


Thanks for having me on, first of all.

We have been looking at environment investments for the last years.

It is just that the industry has picked up steam in the last eight months, more so.

There are different definitions.


Taxable bonds.

The basic concept of the green bond is that a corporation issues a green bond, uses those proceeds and does environmental good or projects that have direct environmental impact.

Hold on one second.

We're looking at a graph that shows the companies you are investing in.

They are very unlikely.

Google, verizon.

Why would they be green?


That is where we at calvert have taken a next step on this because we think the market is still in the first inning of the development of the green bond market in the u.s. the way we define, we would buy a company's general purpose corporate bond and the meadows green -- daemon that as a green -- deem that as green.

This a come from product service technologies or through looking at companies that manage environmental impact.

We have a separate team of environmental analysts him -- separate from our credit analysts.

They're coming through company filings and talking about environmental commitment and programs.

You mentioned google.

I was just going to say, one of the questions i have is how do you define environmental good?

One of the companies you invest in is bank of america and a number of others bank bonds.

Some of these banks lend money to industries that we might consider anything but environmentally good.

Coal, mountaintop mining operations in appalachia.

What we're looking for is whether the issuer, whatever company in this case, bank of america, is making an effort to go towards managing environmental impact.

I know they have been lending and that is what the discussion constantly is at our offices.

What if an oil company comes and issues a green bond.

What if a utility company issues a green bond.

Are they going to buy it?

Or the other commitments they are doing on the other side to actually make up for the environmental impact that they are having.

Bank of america is a great example.

Google is as well.

Bank of america made in environmental commitment of $20 billion of refinancing or financing green projects or energy projects across the world.

This was before they issued a labor green bond where they were your marking those funds for renewable energy.

That is what we are looking for.

Are they having commitments on the other side, where they're trying to good -- do good for the environment.

That is what are environmental analysts are looking for.

Do you believe these investments will outperform other fixed income investments over time?

I'm reminded of a conversation i had with the man who cofounded ebay.

Peter told me that in silicon valley, green is a four letter word because green investments never pay off.

The way we are thinking is that that is a philosophical difference that we have with a lot of competitors, a few competitors.

What we want to deliver to the end investors.

We are looking for an investor who is looking for wristed just risk adjusted -- risk-adjusted fixed income returns.

If we can provide them that and not take away the returns and at the same time we are not giving extra risk on, the biggest risk in the fixed income market would be duration right now.

As well as liquidity.

We give ourselves the ability to hedge out the duration.

That is where the differences, by telling the investor, you do not have to give up or you do not have to slap on more risk just because you are trying to make an environmental impact.

That is where the nuance is.

Expanding what the definition is gives you a wider range of what you can invest in.

Thank you so much.

We really appreciated.

Joining us from calvert investments.

Coming up on "market makers,"

This text has been automatically generated. It may not be 100% accurate.


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