Allocating to Green Bonds

Green bonds are about a decade old financial instrument with cash flows earmarked to improve the environment or combat climate change. The author shows spectacular growth of asset class over time but notes that it is currently still less than 1% investment grade fixed income market. composition has changed considerably time. At start, was mainly very safe supranational institutions issuing in various currencies relatively short maturities. Corporates, especially utilities, followed them, and more recently, governments have started green bonds. These sharp changes make historical data from before 2015 representative for future. author’s returns- characteristics-based analyses show investors allocating should finance this an aggregate allocation if they want reduce impact on risk return characteristics existing portfolio.