On the eve of the UN Climate Summit in New York, Barclays Bank reaffirmed its commitment to the Green Bonds sector by announcing it will invest a minimum of £1bn ($1.6 bn USD) by November 2015 to form part of its liquid asset buffer – one of the largest such investments by a bank.
Green Bonds are fixed income securities designed to raise capital to finance the low carbon environment. The sector has grown significantly in recent years, and Barclays’ Treasury department will be building on its existing Green Bonds portfolio, which currently stands at c.£430m, ($700 bn USD) across various investment grade issuers, including the World Bank.
According to Bloomberg, at the current rate of growth, the total Green Bonds market could surpass $40bn in 2014, three times the size in 2013 of $14bn. Supranational issuers and government agencies constitute a significant proportion of the market, having issued $7.1bn of bonds in 2013, a 70% increase from the previous high in 2010. (See a;so GLOBE-Net article “Green bonds usher in a new era of environmental finance”
Barclays has undertaken thorough due diligence to establish properly the social and environmental credentials of the proposed investment portfolio, including engaging with the key issuers and the leading NGO in this space, Climate Bonds Initiative.
Commenting on the commitment, Tushar Morzaria, Group Finance Director, Barclays, said: “Every so often, market innovation and social imperatives come together to create something exciting that has the potential to make a real difference. The Green Bond sector is a fast-growing and powerful example of this synthesis.” Sean Kidney, Founder and CEO of Climate Bonds Initiative, said:
“Barclays’ commitment to a rigorous approach to what is green makes them a model in the green bonds space. We believe their commitment will encourage other global corporations to step up.”
Madelyn Antoncic, Vice-President and Treasurer, the World Bank, added: “The participation of strategic investors such as Barclays in the Green Bond market will continue to bring scale and diversity to the market and help mobilize more capital for climate-friendly projects. Commitments on the part of banks such as Barclays will have a hugely positive impact on the growth of the market – especially if similar investors follow.”
Brian Upbin, the head of benchmark index research at Barclays Capital Inc., quoted in a Wall Street Journal article said the bonds appeal to investors who want to incorporate, “environmental and social issues into their portfolios that align with their values.” Mr. Upbin said issuers are adopting increasingly strict criteria about what constitutes as a green bond.
Barclays said its Treasury team will continue to consider investments in new supra-national organizations (SSA) and government issued bonds as they become available. Barclays will review its commitment to the Green Bonds sector on an ongoing basis, with the potential to increase it depending on overall growth of the sector.
Barclays also remains committed to contributing to the growth of this sector on the underwriting and distribution platform. Not only is Barclays a signatory to the Green Bond Principles but it is an active lead manager of Green Bonds across jurisdictions, issuers and currencies.