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Why Bonds Good for the Earth Now Carry a ‘Greenium’

U.K. Grid Prepares for Tighter Power Margins This Winter
Photographer: Chris Ratcliffe/Bloomberg

Green bonds are back: Issuance of the environmentally friendly securities reached a new high in September, totaling more than $50 billion, after the pandemic slowed sales in the first part of the year. Following Germany’s first green bond, the pace is set to increase further, thanks to the European Union’s plans to sell as much as 225 billion euros ($265 billion) of the securities. Meanwhile, the European Central Bank has announced that it will buy a new kind of environmentally targeted security called sustainability linked bonds. Signs are emerging of a tangible “greenium” for investors in bonds deemed green — while doubts persist over how much of a difference the designation actually makes in terms of environmental impact.

Their proceeds can go toward new or existing projects that are meant to have positive environmental or climate effects. The field covers energy, transport, waste management, building construction, water and land use.