Asset class favoured by oecd pension funds and

Info icon This preview shows pages 6–8. Sign up to view the full content.

View Full Document Right Arrow Icon
asset class favoured by OECD pension funds and insurance companies, which in 2013 invested on average 53% and 64% respectively of their portfolio in bonds (simple average). 5
Image of page 6

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
WHAT IS A GREEN BOND? . 5 Like any other bond, a green bond is a fixed-income financial instrument for raising capital from investors through the debt capital market. Typically, the bond issuer raises a fixed amount of capital from investors over a set period of time (the “maturity”), repaying the capital (the “principal”) when the bond matures and paying an agreed amount of interest (“coupons”) along the way. A green bond is differentiated from a regular bond by being “labelled”, i.e. designated as “green” by the issuer or another entity, whereby a commitment is made to use the proceeds of green bonds (i.e. the principal) in a transparent manner, and exclusively to finance or re- finance “green” projects, assets or business activities with an environmental benefit. A green label can also be applied to a bond by another entity via its inclusion in a green bond index (Box 3) or via a “tag” on analytical tools widely used in financial markets such as the Bloomberg Terminal. 8 BOX 2: FINANCIAL CHARACTERISTICS OF GREEN BONDS POLICY PERSPECTIVES Figure 2: Composition of the green bond market (as of November 2015, USD Bn, gross issuance) Note: SSA: Sub-sovereign, Supranational and Agency, Muni: Municipal; ABS: Asset Backed Securities. (1) includes national development banks, sub-sovereign jurisdictions including municipalities, agencies, and local funding authorities. (2) includes financial sector bonds and all other corporates that are not energy/utility sector, as well as covered, project and ABS not energy/utility related. (3) includes corporate bonds issued by energy/utility companies as well as covered, project and ABS related to energy/utility companies Source: OECD analysis based on Bloomberg and World Bank data A “green bond” is differentiated from a regular bond by its label, which signifies a commitment to exclusively use the funds raised to finance or re-finance “green” projects, assets or business activities (ICMA, 2015). While the OECD has not defined what constitutes a green investment or green bond, it has discussed in its work definitions for “green infrastructure” and for “green investments” (OECD, 2013; Inderst et al., 2012) and has provided a general quantitative basis for assessing to what extent infrastructure systems can be considered “low-carbon and climate-resilient (LCR)” (Kennedy and Corfee-Morlot, 2012). The OECD’s forthcoming bond modelling scenarios and annual investment needs in this analysis are limited to the renewable energy, energy efficiency and low-emissions vehicle sectors as estimated by the IEA (2014) to be consistent with a 2°C emissions path.
Image of page 7
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern