The ups and downs of green bond issuance
Green bonds have held up relatively well in the market turmoil of recent weeks.
The ICE BofA Green Bond Index lost 5% in total return between the end of February and March 20, while the broader ICE BofA Global Corporate Index was down 11%.
Much of this outperformance down to the defensive nature and higher ratings of the constituents of the Green Bond Index compared with its corporate counterpart: the former includes a significant number of industrials and utilities.
Unsurprisingly, UBS analyst Thomas Wacker says his team expects green bonds: “To exhibit lower volatility and smaller drawdowns compared to non-green bonds during periods of market stress.”
However, green bond issuance has been quieter due to market volatility. There has been a recent flurry of investment grade issuance from blue chip corporates such as PepsiCo and Unilever as firms try to lock in funding in anticipation of prolonged market disruption.
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Cristina Lacaci, |
However, just $1.8 billion in green bonds was launched in March according to the Climate Bonds Initiative.
