Solactive has introduced the Solactive Green Bond EUR USD IG Index, a first-of-its-kind reference for the performance of investment-grade green bonds denominated in euros or US dollars.
The Solactive Green Bond EUR USD IG Index harnesses the green bonds data capabilities of Climate Bonds Initiative.
The index has been licensed to leading European asset manager and ETF issuer Lyxor Asset Management for the creation of future investment products.
Matthieu Mouly, CEO of Lyxor UK, said: “Lyxor is proud to license this index which will provide access to an asset class that we believe will become essential in the very near future. By providing a simple, diversified and robust way to access green bonds, this index allows investors to mobilise their capital towards the enhancement of our environment for the future.”
The index harnesses the global green bonds data capabilities of Climate Bonds Initiative, an investor-focused not-for-profit working to mobilize bond markets for climate change solutions. The index universe comprises all USD and EUR denominated investment-grade bonds that have been defined as green bonds by the Climate Bond Initiative. Floating rate notes, inflation-linked bonds, convertible bonds and municipal bonds are excluded from potential selection.
According to the organization’s Green Bond Principles, green bonds are “instruments in which the proceeds will be exclusively applied (either by specifying Use of Proceeds, Direct Project Exposure, or Securitization) towards new and existing Green Projects – defined here as projects and activities that promote climate or other environmental sustainability purposes.”
To be included in the index, bonds must have at least €300m and $300m outstanding for bonds denominated in euros and US dollars, respectively, with time to maturity of at least 12 months.
Index components are weighted by market value outstanding while corporate issuers and government issuers are capped at 5% and 10% respectively.
The green bond market was initially pioneered by international institutions, such as the World Bank and the European Investment Bank, but is increasingly being driven by corporate and sovereign issues – growing regulatory changes aimed at reducing fossil fuel dependence and consumption are driving the growth in climate-friendly products and services. The French government recently issued €7bn worth of green bonds, only a few weeks after Poland listed the world’s first green sovereign bond in December 2016.
Henning Kahre, Head of Research, Solactive, commented: “We continue to see growing demand for indices underlying ESG-related investment solutions. Considering the success of the Solactive Green Bond Index, the new Solactive Green Bond EUR USD IG Index allows investors to gain exposure to the investment-grade segment of the green bond market for the first time.”
Sean Kidney, CEO, Climate Bonds Initiative, added: “The launch of this index is another sign of market maturity. As Institutional investor interest develops and the labelled market grows in the hundreds of billions annually, a rigorous, investment-grade index provides a strong foundation to assist major green bond based portfolio and capital allocation decisions.”