Large asset managers are urging the UK government to issue green sovereign bonds after politicians passed a historic motion to declare an environment and climate emergency.
Columbia Threadneedle, the £352bn investment group, has written to John Glen, the City minister, Michael Gove, the environment minister, and Robert Stheeman, head of the UK’s Debt Management Office, calling on the government to issue “green gilts”.
“We believe there is significant appetite from pension funds, insurance groups, endowments and family offices across the globe, for investments that provide a financial return while supporting the [UN’s] sustainable development goals,” wrote Simon Bond, director of responsible investment portfolio management at Columbia Threadneedle, in the letter sent on Wednesday. “We encourage the government to consider addressing the climate emergency through green gilts issued to fund sustainable development projects.”
The views were echoed by Insight Investment, the UK’s second-biggest fund manager by assets, which runs £648bn, mostly for pension funds.
“There is demand [for green gilts] but a lack of supply,” said Joshua Kendall, senior environmental, social and governance analyst at Insight. “The government should be recognising this.”
Green bonds are one of the fastest-growing areas in the booming ESG investing industry. They are used by countries and companies to finance environmental projects such as renewable energy or better public transport.
The first green bond was issued by the European Investment Bank in 2007 and the Climate Bonds Initiative, a non-profit group, predicts that up to $250bn of environmental debt will be issued this year.
Until now, most of the activity has come from companies but countries have recently entered the market. The governments of Poland, France, Belgium and Ireland have issued green sovereign debt since 2016, while the Netherlands and Germany have announced that they will follow suit.
This month members of the UK government approved a motion without a vote to declare an environment and climate emergency. The motion, which does not legally compel the government to act, was tabled by Labour leader Jeremy Corbyn. It was a key demand of the Extinction Rebellion activist group, whose protests brought parts of London to a standstill in April.
Last year the government’s environmental audit committee, a cross-party group of MPs, published a report that discussed the idea of green gilts. The Dutch ministry of finance plans to issue its green bonds next week, a sale that is already heavily subscribed.
In a letter sent to prospective investors seen by FTfm, the Dutch state treasury agency, a division of the finance ministry, set out four conditions that buyers had to agree to in order to purchase the bonds. These include having an internal ESG analytics team and reporting its investment in green bonds in its annual report.
Source Financial Times