Bond Market Twins Show It’s Good to Go Green
A pair of German bunds shows investors are willing to pay up for environmentally friendly debt.
Investing in the future.
Photographer: Tobias Schwarz/AFP via Getty Images
Portfolio managers are increasingly under pressure to demonstrate their green credentials, but they’re understandably reluctant to risk losing clients if socially responsible investments turn out to be duds. I’m optimistic, though, that the sheer volume of money flowing into the sector will boost its relative value. And the German bond market is helping to make the argument that conscientious investing needn’t come at the expense of returns.
In September, Germany became the latest nation to issue green bonds, selling 6.5 billion euros ($7.8 billion) of debt repayable in August 2030. Apart from their issue date and size outstanding, the securities are identical to an existing bund issue of 30.5 billion euros sold in June. So setting aside the green designation, the two debt issues are interchangeable. But the younger issue has consistently traded at a premium to its older, non-green peer.