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Green finance: Calls for transition bonds gain traction

New asset class needed if climate change targets are to be met; the green bond principles could provide a framework.

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A growing number of bankers and investment managers are trying to develop a transition bond market that will allow carbon-intensive companies and industries to finance their gradual shift away from fossil fuels. 

Last month, AXA Investment Managers (IM) issued a statement calling for the adoption of transition bonds. 

Yo Takatsuki, head of ESG research and engagement at AXA IM, says it is hoped that it will lead to the development of a working group, so that in 12 months’ time a formal set of principles will be in place to support the growth of transition bonds.

AXA IM is one of the largest holders of green, sustainable and social bonds, with €4.5 billion invested at the end of March – €3.9 billion in green bonds.

Takatsuki says the investment manager made the call because green bonds simply aren’t moving the needle on the shift to clean energy fast enough.

Yo Takatsuki, AXA Investment Managers

“The green bond market has been helpful in encouraging those companies that wanted to be green to do so, and those that already were to become even more green,” says Takatsuki.