Barclays Pledges £1bn Green Bond Investment

Barclays Bank

Barclays Bank

Barclays is to invest a minimum of £1bn in green bonds over the next year, more than doubling its current £430m portfolio.

The banking giant today issued a statement detailing how it had seen significant growth over the past few years in green bonds, as investors flock to take advantage of fixed income securities designed to raise capital to finance the low carbon projects.

Every so often, market innovation and social imperatives come together to create something exciting that has the potential to make a real difference,

said Tushar Morzaria, group finance director at Barclays.

The Green Bond sector is a fast-growing and powerful example of this synthesis.

Consequently, the bank said it is now aiming to invest £1bn in green bonds and could invest more still if the sector continues its rapid expansion.
Green bonds have grown massively in popularity, with over $40bn expected to be issued during 2014, compared to just $14bn last year. The supranational issuers and government agencies Barclays says it is keen to target constitute a significant proportion of this market, having issued $7.1bn of bonds in 2013 – a 70 per cent increase from the previous high recorded in 2010.

The market framework for Green Bonds has also become more established after 13 major banks, including Barclays, Goldman Sachs, JP Morgan, and HSBC, signed up to the Green Bond Principles in January, committing to a set of voluntary guidelines on the development and issuance of green bonds, in a bid to standardise the market and reassure investors. Earlier this year, Barclays also launched a green bonds index with MSCI, providing further evidence of the sector’s growing maturity.

Madelyn Antoncic, vice-president and treasurer of the World Bank, said the involvement of such major firms would help grow the green bonds market.

The participation of strategic investors such as Barclays in the Green Bond market will continue to bring scale and diversity to the market and help mobilise more capital for climate-friendly project,

she added.

Commitments on the part of banks such as Barclays will have a hugely positive impact on the growth of the market – especially if similar investors follow.

In related news, investment consultancy Mercer announced today that it has launched a major new research project to analyse investment risks under a range of different climate change scenarios.
The company said that investment partners representing more than $1.5tr of assets will contribute to the project, which will be published in the first quarter of next year. The final report will aim to predict climate-related economic impacts through to 2030 and 2050 and calculate the investment implications.

Institutional investors require actionable information to adequately reflect climate risks and opportunities into asset allocation,

said Karsten Löffler, managing director of Allianz Climate Solutions, one of the companies contributing to the research.

While global warming is a fact, we face great uncertainty around policy measures and the financial impacts in the nearer term are little understood. The Mercer study is an important step in channeling scientific and regulatory insights on climate change into the investment process and could become a standard toolbox for the strategic asset allocation.