Invest in green, social and sustainable bonds

Financial support for projects and activities that have a positive impact on the environment or society: this is the goal of environmental, social and sustainable bonds. Commitment born of global understanding: Finance plays a role in responding to today’s major environmental and social challenges.

Issued by companies as well as governments, these “compulsory” debts are increasingly successful. Explanations.

In response to a report released by the IPCC in 2007 linking human activity to global warming, the European Investment Bank and the World Bank issued the first green bonds. Goal: To meet this serious challenge with the help of finance and the bond market.

Green bonds, designed to finance projects or activities that have a positive impact on the environment, focus on sectors such as renewable energy, low-emission transport, green building construction, water management or pollution control.

“Social” bonds are aimed at supporting projects and activities aimed at solving social problems, in particular by combating poverty and inequality or for equality, diversity and social inclusion.

Finally, “sustainable” bonds correspond to bonds that finance projects that combine environmental and social issues that are often linked.

Fast growing market

Despite their relative newness in the market, these green, social and sustainable bonds have managed to find a place. Nearly $650 billion of such bonds were issued in 2021, double the amount in 2019.[1]. This trend is confirmed in 2022. Moody’s estimates that this market could reach $1,350 billion by the end of 2022.[2].

While green bonds dominate with nearly 60% of issuances in 2021, social and sustainable bonds are on the rise, a dynamic that is undoubtedly linked to the social issues that have been, and still are, at the heart of the health crisis.

Europe, world leader in green, social and sustainable bonds

The global market is largely dominated by Europe, which issued 56% green bonds in 2021 (up from 32% in 2017), 71% social bonds and 60% sustainable bonds.

A market supported by the interest of investors, mainly institutional investors, regulatory developments (including the SFDR – Sustainable Financial Disclosure Regulation), as well as the commitment of the European Commission, which is also determined to become a leader in sustainable finance, In October 2021, the European Union issued its the first green loan to finance European companies involved in the green transition.

Problems and prospects

The development of both supply and demand from investors for these bonds cannot be explained by their very nature. These bonds allow issuers to finance projects and/or activities that can address major environmental and social issues of today and tomorrow.

Investment decision on this topic

To meet this growing demand from investors, BNP Paribas Asset Management has expanded its range of bond ETFs and decided to launch an ETF that replicates the JP Morgan ESG Green, Social & Sustainability IG EUR Bond index. This index offers exposure to many sovereign, quasi-sovereign, corporate or supranational securities. It combines green bonds, social bonds and sustainability bonds.

No guarantees are given as to the validity of certain filters at any time, in particular with regard to maintaining a carbon footprint between two rebalancings. Additional information about the index, its composition, calculation, methodology and rules for periodic monitoring and rebalancing is available at www.jpmorgan.com ›

Investments in a fund are subject to market fluctuations and the risks inherent in investing in transferable securities. The value of investments and the return on them can both decrease and increase, and investors may not get back the full amount of their investment. The funds described represent the risk of capital loss. In the case of funds investing in foreign currencies, currency conversion is likely to affect the value of the investment given that the latter is subject to exchange rate fluctuations. For a fuller definition and description of risks, see the prospectuses and KIID funds. Before subscribing, you should read the latest version of the prospectus and KIID, which are available free of charge on our website. www.easy.bnpparibas.fr


[1] Source: Moody’s and Environmental Finance.

[2] Source: Moody’s, ESG, Sustainable bonds to reach record $1.35 trillion in 2022.

3 ESG: social environment and governance