Bloomberg has launched new green-tilted fixed-income indices, both providing investors with exposure to sustainable products and aiming to increase weighting to green bonds in the company’s flagship indices.
According to Bloomberg, its tilted indices incorporate research from the company’s ESG and fixed-income data teams, allowing sustainable products to maintain similar characteristics to parent benchmarks. The company’s year-to-date return for the Bloomberg Global Aggregate 20% Green Bond Index is reportedly 0.75% above that of the parent benchmark, the Bloomberg Global Aggregate Index.
Incorporating these indices should help those interested in sustainability-focused investment achieve additional returns, especially as green bonds become increasingly popular.
“Sales of green bonds have reached record highs this year, up more than 10% compared to volumes for the same period last year, while the broader sustainable debt market has soared past new heights to $7 trillion historically, and Bloomberg Indices has closely tracked this growing trend to provide investors with myriad ways to introduce and benchmark this market to their portfolios,” said Jonathan Gardiner, product manager for sustainable indices with Bloomberg Index Services.
Bloomberg has also expanded its suite of Global Aggregate Green, Social, Sustainability Bond Indices, which now include more than 70 benchmarks. Indices may be customized by investors with the incorporation of a variety of fields such as business involvement exclusions, EU Taxonomy inputs, and regulatory screens, among others.
Private Investment Reportedly Key to Meeting Climate Targets
Especially with concerns over the economic costs associated with climate change on the rise, green bond investment has become an increasingly popular sustainable investment platform.
Green bonds, which specifically raise money for climate and environmental projects, have been identified as a key instrument for supporting climate change mitigation and meeting international emissions reductions targets. Green bonds may support projects such as energy efficiency, pollution prevention, and clean energy development, to name a few.
According to a recent report from SEB, green bond investment in renewables is at an all-time high but still remains below required investment needed to decarbonize by 2050.
The International Monetary Fund estimates that reaching net zero by 2050 will require private climate financing to rise from $900 billion in 2020 to $5 trillion annually by 2030. Various incentives have been put in place for more widespread adoption of green bonds, such as policy initiatives and private efforts, including this new offering from Bloomberg.
