Building the case for green bonds


The global green bond market has been booming over the last years with an exponential growth of new issues from various types of new actors. It has reached approximately USD 250bn with already more than USD 150 bn of new issuance last year.

After 2013 when corporates started to use the asset class in order to finance their energy transition, sovereigns are now coming to the market following the path initiated with Poland which paved the way in December 2016. During 2017, France became the second nation to issue a sovereign green bond before Fiji became the first Pacific Island nation and emerging economy to do so.

Green Bond new issues by type of issuer from 2013 to 2018 (USD bn)

Source: Allianz Global Investors, Climate Bonds Initiative. Data as of 13/02/2018

Defining the green bond market characteristics

Green bonds are standard bonds with a use of proceeds fully dedicated to projects with environmental benefits focusing on climate change mitigation/adaptation. They can be issued by public or private sector entities and respond to a desire for products offering the opportunity to finance projects with tangible positive impacts. There is currently no clear difference in pricing between green and non-green bonds from the same issuer with the same maturity. The global green bond market yield and duration are today quite close to those of the global core fixed income market.

Source: Allianz Global Investors, Bloomberg, Global Green Bonds represented by the Bloomberg Barclays MSCI Green Bond index, Global Aggregate represented by the Bloomberg Barclays Global Aggregate Index. Data as of 08/03/2018

In terms of performance, the historical correlation between a global green bond and a global aggregate benchmark is very strong, more than 90%. The green bond universe, represented by the Bloomberg Barclays MSCI Green Bond index even tends to outperform the broad global bond market measured by the Bloomberg Barclays Global Aggregate Bond index over the last years with a comparable volatility as illustrated below (Returns hedged, in USD for the 1st graph, in EUR for the 2nd):

Source: Allianz Global Investors, Bloomberg, Global Green Bonds represented by the Bloomberg Barclays MSCI Green Bond index, Global Aggregate represented by the Bloomberg Barclays Global Aggregate Index. Data as of 07/03/2018

How to integrate green bonds in an asset allocation?

Considering the high correlation between green bonds and core fixed income, investors have the possibility to reallocate part of their core fixed income allocation to green bonds in order to increase diversification and “green” their portfolio with a minimal impact on the risk/return profile of their portfolio. Diversification can notably be achieved thanks to the differences between both universes notably in terms of currency or sector exposure. Issuers from the Corporate sector represent for example 32% of the green bond universe vs 18% in the Bloomberg Barclays Global Aggregate Index. Green bonds are therefore an opportunity for investors to integrate climate risk mitigation in a core fixed income allocation without changing too much the overall risk/return profile of their portfolio.

Source: Allianz Global Investors, Bloomberg, Global Green Bonds represented by the Bloomberg Barclays MSCI Green Bond index, Global Aggregate represented by the Bloomberg Barclays Global Aggregate Index. Data as of 08/03/2018

Why does active management matter?

An active manager has the capacity to generate financial and societal alpha through the green bond selection process. On the green bond market, it is essential to be able to run an analysis to identify bonds financing projects with a clear positive impact on the financing of the energy transition. As of today, not all green-labelled bonds do have this clear positive impact.

In a recent example, an oil and gas company issued a green bond aimed at funding projects focusing on energy efficiency and low emissions technologies. The bond proceeds were used to reduce the CO² emissions of the company’s chemical and refinery facilities. While this company’s bond did not directly invest in increasing fossil fuel output, refineries are still processing fossil fuels and any investment in making refineries more efficient, as this bond is aiming to, will likely extend plant operating lifetimes and therefore indirectly increase emissions over time. It is the role of the active manager to evaluate whether or not this kind of bond can be considered as eligible in a green bond strategy.

Investing involves risk. The value of an investment and the income from it will fluctuate and investors may not get back the principal invested. Past performance is not indicative of future performance. This is a marketing communication. It is for informational purposes only. This document does not constitute investment advice or a recommendation to buy, sell or hold any security and shall not be deemed an offer to sell or a solicitation of an offer to buy any security.

The views and opinions expressed herein, which are subject to change without notice, are those of the issuer or its affiliated companies at the time of publication. Certain data used are derived from various sources believed to be reliable, but the accuracy or completeness of the data is not guaranteed and no liability is assumed for any direct or consequential losses arising from their use. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted.

This material has not been reviewed by any regulatory authorities. In mainland China, it is used only as supporting material to the offshore investment products offered by commercial banks under the Qualified Domestic Institutional Investors scheme pursuant to applicable rules and regulations.

This document is being distributed by the following Allianz Global Investors companies: Allianz Global Investors U.S. LLC, an investment adviser registered with the U.S. Securities and Exchange Commission; Allianz Global Investors GmbH, an investment company in Germany, authorized by the German Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin); Allianz Global Investors Asia Pacific Ltd., licensed by the Hong Kong Securities and Futures Commission; Allianz Global Investors Singapore Ltd., regulated by the Monetary Authority of Singapore [Company Registration No. 199907169Z]; Allianz Global Investors Japan Co., Ltd., registered in Japan as a Financial Instruments Business Operator [Registered No. The Director of Kanto Local Finance Bureau (Financial Instruments Business Operator), No. 424, Member of Japan Investment Advisers Association and Investment Trust Association, Japan];and Allianz Global Investors Taiwan Ltd., licensed by Financial Supervisory Commission in Taiwan.


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A new Grassroots Research survey of corporate travel managers and travel agents showed that US companies plan to increase their travel expenditures this year -- in line with Allianz Global Investors’ outlook for strong US economic growth.

Key takeaways

  • Grassroots® Research recently conducted the latest in a long-running series of surveys with corporate travel managers and other travel experts: 64% plan to spend more on corporate travel in 2018
  • Not everything is looking up for travel trends: 12% of respondents to our business-travel survey said they will decrease spending in 2018 vs 2017, the second-highest year-over-year reduction since 2012
  • Our new Grassroots® study confirms a trend we’ve seen taking shape since 2013: convention attendance seems to be flattening out, if not falling slightly overall