Looking forward to a recovery with ‘green collar’ jobs

Insights

Looking forward to a recovery with ‘green collar’ jobs

  • Supranationals and government agencies were among the leading issuers of Covid-19 response bonds in 2020. The volume of newly issued debt based on environmental, social and governance principles reached $520 billion for 2020, up by more than $215 billion from 2019.
  • More countries look likely to commit themselves to zero carbon emissions targets, as well as frameworks for achieving this and new regulations. A competitive tension is building as countries want to make sure they do not get left behind.
  • Both governments and the bond market will channel funds into a green recovery in 2021. Notably, the EU is raising €100 billion to aid countries hit hard by Covid-19, with much of the issuance conducted in 2021.
  • We are looking to improve the market – in terms of the opportunities for issuance, the quality of the bonds and the rigour of reporting – and are again working with the International Capital Markets Association (ICMA) to achieve this.

2021 promises to be a seminal year. Following the Democrat win in November’s US presidential election, the world’s biggest polluter looks set to reverse its decision to leave the Paris Agreement. Further, more countries look likely to commit themselves to zero carbon emissions targets, as well as frameworks for achieving this and new regulations.

A competitive tension is building as countries want to make sure they do not get left behind. For instance, the UK looks likely to try to get ahead of Europe in its emerging green agenda.

When UK Chancellor, Rishi Sunak, announced in November his plans to issue the UK’s first green gilts in 20211 it was a significant step. The announcement not only signalled the government’s intent, but also set an example that is likely to spur further issuance of green bonds and galvanise the development of green and social finance in the UK.

For Columbia Threadneedle Investments, this is especially welcome as we have been campaigning for a green gilt, notably through our membership of the Impact Investing Institute. The Institute’s October 2020 joint proposal for a Green+ Gilt was supported publicly by 400 asset owners and investors, representing assets under management of more than £10 trillion, showing the substantial support in the market.2

We see part of our role as engaging to help improve the green and social bond markets. The UK’s green gilt will bring a promising start to 2021, a year in which the UK hosts the COP-26 UN Climate Change Conference. Even more impactful, though, is the announcement that the government will launch a national infrastructure bank,3 which could issue green or social bonds itself

Supranationals and government agencies were among the leading issuers of Covid-19 response bonds in 2020. The volume of newly issued debt based on environmental, social and governance principles reached $520 billion for 2020, up by more than $215 billion from 2019.4Notably, $160 billion of this were social bonds, which equates to a 788% increase in issuance versus 2019, which itself was a record year for social issuance, and more than half were specific bonds targeting Covid-19 alleviation.5

The announcement around green gilts not only signalled the government’s intent, but also set an example that is likely to spur further issuance of green bonds

We are proud of not just the size of the bond market’s response to the crisis, but also the speed. These Covid-19 response bonds were being issued by the end of March, just a few short weeks after the pandemic reached Europe.

Issuers like these could respond quickly because they already had green, sustainability or even social bond frameworks in place, setting out what types of projects they could finance, how to report on use of proceeds and so on. That allowed them to react very fast. In 2021, I would hope to see not just more issuance, but also more agencies, companies and financial institutions putting in place similar frameworks – this would offer greater opportunities for us as we continue to invest in these areas.

Both governments and the bond market will channel funds into a green recovery in 2021. Notably, the EU is raising €100 billion to aid countries hit hard by Covid-19, with much of the issuance conducted in 2021.6 While this money will focus on environmental projects, it should have social co-benefits too in the form of “green collar” jobs created in sectors such as green infrastructure.

By working with the Impact Investing Institute and the International Capital Markets Association (ICMA), we are looking to improve the market – in terms of the opportunities for issuance, the quality of the bonds and the rigour of reporting

By working with the Impact Investing Institute and the International Capital Markets Association (ICMA), we are looking to improve the market – in terms of the opportunities for issuance, the quality of the bonds and the rigour of reporting. We have previously contributed to the design of the ICMA’s social bond principles and have committed to work with the association for another year.

A final word on new environmental and social legislation expected in 2021. Such legislation is likely to impose substantial costs on some businesses. In that situation, would you rather be invested in a conventional fund where regulation may introduce headwinds for its holdings or in a responsible investment fund that could benefit?

15 January 2021
Simon Bond
Simon Bond
Director of Responsible Investment Portfolio Management
Share article
Key topics
Related topics
Listen on Stitcher badge
Share article
Key topics
Related topics

PDF

Looking forward to a recovery with ‘green collar’ jobs

1 FTadviser.com, UK to launch first green gilt in 2021, 10 November 2020.

2 https://www.impactinvest.org.uk/wp-content/uploads/2020/10/Green-Plus-Gilt-Proposal.pdf, October 2020

3 The Construction Index, National Infrastructure Strategy: UK infrastructure bank, 26 November 2020

4Data from Bloomberg and International Bank for Reconstruction & Development, 31 December 2020.

5 Columbia Threadneedle analysis, January 2021

6 European Parliament, Covid-19: 10 things the EU is doing for economic recovery, 29 October 2020

Important information

The research and analysis included on this website has been produced by Columbia Threadneedle Investments for its own investment management activities, may have been acted upon prior to publication and is made available here incidentally. Any opinions expressed are made as at the date of publication but are subject to change without notice and should not be seen as investment advice. Information obtained from external sources is believed to be reliable but its accuracy or completeness cannot be guaranteed.

Related Insights

8 October 2024

The climate risk ‘hot potato’– which sector will be left with burnt fingers?

A secure and consistent supply of critical minerals is fundamental to the energy transition and to achieving net-zero, but demand is putting pressure on supply chains and costs, and risks polarising sentiment around the energy transition.
19 September 2024

Sally Springer

Senior Thematic Research Analyst, Global Research

James Hodge

Analyst, Research Advanced Analytics

If demographics are destiny, investors should brace for change

World demographics are changing rapidly. With markets experiencing these shifts at different paces, we look at how three major economies are reacting to demographic shifts and highlight the potential implications.
Read time - 8 min
23 August 2024

Jamie Jenkins

Managing Director, Head of Global ESG Equities

Nick Henderson

Director, Portfolio Manager

Harry Waight

Portfolio Manager

CT Responsible Global Equity Strategy 2023 Responsible Profile

Learn how we engage to understand and encourage improvement in companies’ management practices of ESG issues
Read time - 3 min
8 October 2024

Fixed Income Desk

In Credit - Weekly Snapshot

In Credit Weekly Snapshot – October 2024

Our fixed income team provide their weekly snapshot of market events.
8 October 2024

The climate risk ‘hot potato’– which sector will be left with burnt fingers?

A secure and consistent supply of critical minerals is fundamental to the energy transition and to achieving net-zero, but demand is putting pressure on supply chains and costs, and risks polarising sentiment around the energy transition.
8 October 2024

Rosa Fenwick

Head of LDI Implementation

Q3 2024 repo update

Fears of an economic slowdown and helpful falls in inflation rates opened the door to the first rate cuts in the US and the UK, and for a second in Europe.
true
true

Important information

The research and analysis included on this website has been produced by Columbia Threadneedle Investments for its own investment management activities, may have been acted upon prior to publication and is made available here incidentally. Any opinions expressed are made as at the date of publication but are subject to change without notice and should not be seen as investment advice. Information obtained from external sources is believed to be reliable but its accuracy or completeness cannot be guaranteed.

You may also like

Investment approach

Teamwork defines us and is fundamental to our investment approach, which is structured to facilitate the generation, assessment and implementation of good, strong investment ideas for our portfolios.

Funds and Prices

Columbia Threadneedle Investments has a comprehensive range of investment funds catering for a broad range of objectives.

Our Capabilities

We offer a broad range of actively managed investment strategies and solutions covering global, regional and domestic markets and asset classes.

Thank you. You can now visit your preference centre to choose which insights you would like to receive by email.

To view and control which insights you receive from us by email, please visit your preference centre.

Woman listens to music through headphones
Play Video

CT Property Trust- Fund Manager Update

Sed ut perspiciatis unde omnis iste natus error sit voluptatem accusantium doloremque laudantium