On Monday, Barclays reaffirmed its commitment to the Green Bonds sector by announcing it will invest a minimum of £1bn (US$1.64) by November 2015 to form part of its liquid asset buffer — one of the largest such investments by a bank.
"Every so often, market innovation and social imperatives come together to create something exciting that has the potential to make a real difference,” said Tushar Morzaria, Group Finance Director at Barclays. “The Green Bond sector is a fast-growing and powerful example of this synthesis."
Green Bonds are fixed-income securities designed to raise capital to finance a low-carbon environment. The sector has grown significantly in recent years[1], and Barclays' Treasury department will be building on its existing Green Bonds portfolio, which currently stands at roughly £430m (roughly US$700m), across various investment grade issuers, including the World Bank.
Barclays says it has undertaken thorough due diligence to properly establish 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.
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.”
Barclays' 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 says it 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, it is an active lead manager of Green Bonds across jurisdictions, issuers and currencies.
In addition to its goal of “driving economic development and social prosperity” through Green Bonds, Barclays is working to mitigate its own operational carbon footprint: The bank offsets its unavoidable emissions through investment in REDD+ projects, which create incentives for local communities to protect and monitor local forests while conserving habitat for wildlife, all while preventing the emissions associated with forest destruction.
In other sustainability investment news, Sainsbury’s announced in July that it had agreed to a £200 million corporate “green” loan — the first of its kind — to invest in ongoing carbon-reduction, water-related and other sustainability projects. While Green Bonds are now increasingly issued by institutions to support various types of sustainability initiatives, the retailer said this is the first time that a commercial loan has been structured to do the same: The structure of the loan is consistent with the Green Bond Principles 2014, the guidelines developed by a leading group of bond underwriters and endorsed by environmental groups to provide a clear framework for this emerging asset class for the benefit of investors and issuers.
1 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 percent increase from the previous high in 2010.
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Published Sep 22, 2014 7pm EDT / 4pm PDT / 12am BST / 1am CEST