A new bond is hoping to address climate change issues and boost the socially responsible investing market.
BNP Paribas Asset Management has launched the Parvest Green Bond which identifies investments expected to have the most positive environmental impact.
It invests in bonds used to finance projects designed to mitigate or address climate change issues.
Currently valued at €100m (£89m), it is managed by BNP Paribas AM’s fixed income team while leveraging proprietary analysis provided by its sustainability research team.
Arnaud-Guilhem Lamy, manager of Parvest Green Bond, said: “Climate change is one of the greatest challenges of our time and green bonds are one of the best ways to finance activities with low greenhouse gas emissions and to support low-carbon and climate-resilient development.
“Meanwhile the rapid expansion of the green bond market means that it is now diversified enough to offer a genuine investment solution.
"Our SRI research expertise dating back 15 years, very well-resourced fixed income portfolio management capability and almost €500m (£446m) of existing investments in green bonds makes us ideally placed to manage Parvest Green Bond.
"Greenhouse gas avoidance is the key climate benefit of the fund, enabling investors to offset carbon emissions in their fixed income portfolios, as well as to meet sustainable regulatory requirements.”
Parvest Green Bond is benchmarked against the Bloomberg Barclays MSCI Global Green Bond Index (Euro Hedged). It invests in issues with a minimum credit rating of B-, and may also use futures, options and swaps.
The fund aims to have a minimum of 83.5 per cent of green bonds. Denominated in euros, it uses FX derivatives to hedge bonds issued in other currencies.
Analysis conducted by BNP Paribas AM suggests that between now and 2030, $4trn (£3trn) will be required annually to support the energy transition towards a low-carbon economy.
Meanwhile the global fixed-income market totals $100trn (£75.8trn) of outstanding securities.
Green bonds are often seen as the missing link between the need for energy transition financing and supply from debt capital markets, and are therefore ideally suited to support low-carbon and climate-resilient development.
Gemma Siddle, chartered financial planner at Newton Aycliffe-based Eldon Financial Planning, said: “It’s pleasing to see the SRI investment arena expand further into non-equity asset classes. For many years, it was difficult to build a diversified portfolio within an SRI mandate.
"Increasingly investors, especially younger ones, are showing an interest in socially responsible investment so to see the market expand and adapt in this area is great.”
