What to look for before buying green bonds
As seen in just the past couple of years, the number of funds investing in green bonds is growing along with the market. Investors held $6 billion in sustainable bond funds at the end of 2020, according to data from Morningstar.
With this surge has come many standards but no universally agreed-upon definitions, which can make an eager new investor suddenly feel hesitant and uncertain. "I think the frustration that investors find when they first go into this market is, they're assuming that everything is going to look the same," MacLean says.
Thankfully, there are places you can turn to for guidance if you want to dig deeper into what makes a bond a green bond. In 2014, the International Capital Market Association created the Green Bond Principles, which are voluntary guidelines for issuers of green bonds.
"Citi was one of the original authors of the Green Bond Principles," says Philip Brown, Head of Citi's Sustainable Debt Capital Markets business, based in London. "We wanted to form some simple principles around which green bonds would be structured."