October 20, 2011
New Green Bonds Product Will Support Climate Protection
by Robert Kropp
State Street Global Advisors says its High Quality Green Bond product will invest in green bonds
issued by supranational or multilateral development banks.
Clients of one of the world's largest fixed income managers will now be able to direct their
investments to provide positive economic and environmental benefits.
State Street Global Advisors (SSgA), with $306 billion in assets,
announced this week that it has established a new High Quality Green Bond strategy to invest in
green bonds issued by supranational or multilateral development banks.
fixed income investment product will focus on green bonds issued primarily by institutions such as
the World Bank and the European Investment Bank (EIB), that allocate their proceeds to fund
environmentally beneficial development projects.
Fixed income investments such as bonds
are generally considered to be of lower risk and lower volatility than other investment options.
The World Bank Green Bonds support World Bank projects addressing
mitigation and adaptation solutions for climate change, and have had four issuances since 2008.
World Bank has thus far issued over $2 billion in Green Bonds through 42 transactions and 16
currencies. Recent projects financed by Green Bonds include sustainable urban transport in
Colombia, wind power development in Egypt, and Turkey's Private Sector Renewable Energy and Energy
The proceeds from EIB's Climate Awareness Bond, launched in 2007, are used to
finance renewable energy and energy efficiency projects that contribute to climate protection.
Since the launch, EIB has raised almost $2.1 billion through the program. A recent example is $101
million in financing for the construction of 22 wind farms in Portugal with a total capacity of 486
Overall, current estimates from all issuers of green bonds are approximately $12
SSgA's Green Bond strategy will seek to approximate the performance of its
duration benchmark, the Barclays Capital US Treasury Index.
"Investment managers are being
asked more frequently by their clients to consider sustainability and environmental factors in
their approach to the market," said Chris McKnett, head of environment, social and governance (ESG)
investing at SSgA. "The development of a green bond strategy as a complementary solution to our
other ESG investment offerings was driven by increased market demand amongst investors."
SSgA reports having more than $122 billion in overall ESG assets under management as of June