Report reveals green bonds outperforming ‘vanilla’ equivalents

The Climate Bonds Initiative report evidences the strong performance of green bonds.

The H2 2021 Green Bond Pricing in the Primary Market Report is the 13^th iteration of a research series that analyses the pricing dynamics of green bonds, and examines how these instruments offer pricing advantages for investors and issuers.

Following the same trend as the H1 2021 report and longer-term analysis, the Climate Bonds Initiative observed that, on average, green bonds performed well across all metrics in the primary market in both Euros and US dollars.

Sean Kidney, CEO of the Climate Bonds Initiative said: “The demand for green bonds is defiantly withstanding the economic, social and geopolitical turmoil of the last couple of years. The ability to weather storms and survive downturns is absolute gold dust and promises value across primary and secondary markets.”

The report included 73 green bonds with a combined face value of US$71.8 billion and analysis suggests that the pricing benefits of green bonds are pervasive, having endured as the market saw over half a trillion USD dollars in issuance in 2021.

Within the Sovereign Green Bond Club, four issuers added six new sovereign green bonds; Spain and Korea priced their first sovereign green bonds, while Germany and Hong Kong returned to the market with new bonds.

A ninth green bond ETF, the Lyxor Euro Government Green Bond DR UCITS, was launched in July, with the EFT’s combined assets reaching US$1.4 billion by the end of 2021. The growth of green bond ETFs adds further demand pressure to green bonds in the secondary market, the report concluded.

Francois Millet, head of strategy and ESG at Lyxor ETF, Amundi Group said:“The expansion of green bond indices reflects the booming diversification of the market, where sovereigns add a new growth driver. Granularity of supply now allows green bonds to be part of any fixed income allocation.

“ETF flows suggested that, so far, green bonds were not impacted by tactical reallocations linked to inflation and rate expectations.”

Millet added: “As investors have been facing higher disclosure standards since 2021, green bonds turn out to offer one of the few adequate sources of impact assessment, which will continue to support a strong fundamental demand.”