Investors need better ways of evaluating a fund
managers green credentials or risk being seduced by
investment strategies dressed up as
Consultants should ask whether firms are walking the
walk, said Noel OHalloran, chief investment
officer, at KBI Global Investors. He has a checklist of
considerations before a fund may be deemed truly
Investors should ensure firms are signatories to the United
Nations Principles for Responsible Investment, ask to see
their annual submission, and explore the external organizations
with which they have relationships, according to
His comments come ahead of the International Capital Market
Associations annual Green Bond Principles conference in Paris
on June 14. Green bonds which aim to produce returns
from environmentally friendly investments have fallen
under scrutiny as financial firms seek to justify their
inclusion in their environment funds.
France leads Europe in the sale of green bonds with $31.3
billion outstanding at the end of last year, followed by
Germany with $17.7 billion and the Netherlands with $12.2
billion, according to a report last month from the Climate Bonds Initiative.
Dutch bank DNB warned in a paper earlier this year that the
growing appetite for green bonds could be a trigger for firms
to profile investments as green even when they are
not. DNB noted vast differences in how countries treat green
bonds, citing China as an example where clean coal
companies can be financed by them.
The absence of generally accepted definitions and
criteria to assess whether bonds are green hampers the
credibility and the development of the market, DNB said in the
Collaborative engagement is key to verifying a fund
managers green credentials, according to OHalloran,
who said that involvement with the Carbon Disclosure Project,
the UK Stewardship Code, the CDP Water Initiative, and the
Institutional Investors Group on Climate Change, add
creditability to an investment firms commitment.
Mark Carney, governor of the Bank of England, has called for
faster development of the green-bond market to assist in
reducing climate change risks for the world economy. The
development of this new global asset class is an opportunity to
advance a low carbon future while raising global investment and
spurring growth, he said in a speech in Berlin in
September, as reported by Reuters at the time.
Britain has just $1.2 billion of green bonds outstanding,
according to the Climate Bonds Initiative report.