A joint venture comprised of two major finance players and a leading non-profit group has launched the first-ever performance index for green bonds denominated in dollars and euros.
Announced on 14 February, the service has stemmed from a collaboration between indexing specialist Solactive AG, ETF issuer Lyxor International Asset Management and sustainable-finance advocates the Climate Bonds Initiative.
Its full title is the Solactive Green Bond EUR USD IG Index.
Under the terms of the partnership, Solactive AG has provided the technical infrastructure for the index, with Lyxor onboard as licensee.
Meanwhile, the initiative will feed the service with live data updates about the plethora of financial products on its radar that qualify as green bonds.
The organisation classes green bonds as “instruments in which the proceeds will be exclusively applied (either by specifying use of proceeds, direct project exposure or securitisation) towards new and existing green projects – [which we define] as projects and activities that promote… environmental sustainability purposes”.
As The Treasurer has reported in the past few months, green bonds have become an ever-more vital force in financial markets, with the instruments reaching a number of important milestones, such as:
In the wake of those developments around bonds with environmental, social and governance (ESG) purposes, the initiative’s leader Sean Kidney feels that the new index is “another sign of market maturity”.
He explained: “As institutional investor interest develops and the labelled market grows in the hundreds of billions annually, a rigorous, investment-grade index provides a strong foundation to assist major green bond-based portfolio and capital-allocation decisions.”
“We continue to see growing demand for indices underlying ESG-related investment solutions,” observed Solactive AG head of research Henning Kahre. The new index, he noted, “allows investors to gain exposure to the investment-grade segment of the green bond market for the first time.”
Lyxor UK LLP chief Matthieu Mouly said that he believes the ESG asset class “will become essential in the very near future”.
He added: “By providing a simple, diversified and robust way to access green bonds, this index allows investors to mobilise their capital towards the enhancement of our environment for the future.”
To be eligible for inclusion in the index, securities must have at least €300m and $300m outstanding for bonds denominated in euros and dollars respectively, with time to maturity of at least 12 months.