The “green economy” is an overarching economic sector with pronounced sustainability in terms of environmental protection. All companies that don’t forego productivity but manage to reduce their environmental impact, for example regarding the consumption of natural resources and the reduction of CO2 production, can be labelled “green”. Green bonds are bonds issued by companies geared towards or committed to sustainable business practices and environmental protection.
In 2023, the clean energy industry witnessed one of the toughest years in its short history. Supply chain issues, the energy crisis prompted by Russia’s invasion of Ukraine and the ensuing ramp of interest rates and inflation hit all entities across the natural resources value chain.
Continue readingCarbon Capture and Storage (CCS) refers to the process of capturing carbon dioxide (CO2) emissions and storing them safely so that they do not harm the environment. This term encapsulates technologies that capture emissions at the source as well as those that capture CO2 from the atmosphere.
Continue readingThe European Union is attempting to bring clarity to the green bond market with a new regulation on green bonds and sustainable finance. The aim is to effectively counteract greenwashing and (perhaps) revive the attractiveness of these debt instruments. The European Green Bond label The new regulation being sought by the EU will mean that bonds that comply with its content will be able to bear the title 'European Green Bond' or 'EuGB'. This is a voluntary rather than a man ...
Continue readingA study by Scope Ratings, also reported by Focus Risparmio in an article by Chiara Santilli, notes a decline in ESG corporate bond issuance in Europe (and to some extent in the US). The decline in green bond issuance in Europe In Europe, the decline in ESG corporate bond issuance predicted by Scope Ratings is expected to reach 10 per cent by the end of this year. According to Santilli's article, the decline in ESG bond issuance is also due to rising interest rates, which increase financing ...
Continue readingAn analysis shows how much investors are willing to pay in terms of yield, other things being equal, for the bond they invest in to be green. Andrew Isbester writes about it on finews.com. The green premium: what is it and how much is it on average? Economists at the Hong Kong Monetary Authority (HKMA) have tried to put a value on the 'green premium' on bond investments, the so-called 'greenium' ('green' + 'premium'): this is the return that investors would be w ...
Continue readingGreen bonds seem to have lost some of their advantages over traditional bonds. But how are these asset classes different, and why does Morningstar write that they cannot replace the traditional bond component in a portfolio? A difficult situation for green bonds As we read on Morningstar, green bonds are typical financial products of the European market, which has the vast majority of issues in recent years (94 out of 113, writes Silano). In 2022, however, these financial instruments went ...
Continue reading"The electric light did not come from the continuous improvement of candles." – Oren Harari. In the year 1900, the world had a simple energy mix. One half of total energy supply came from coal and the other came from biomass. Gas, oil, and hydropower existed but paled in comparison. Fast forward 121 years, by 2021, things had changed in two key aspects.
Continue readingWithin WisdomTree’s range of thematic strategies, we frequently have the opportunity to work with different subject-matter experts. For our Battery Solutions strategy, we partner with theme experts, Wood Mackenzie. On 30 March 2023, Chris Gannatti, WisdomTree’s Global Head of Research, caught up with Adam Woods, Senior Research Analyst, Global Coal Markets, for Wood Mackenzie.
Continue readingWhy did green bonds lose more value than traditional bonds in 2022? The reason lies in so-called 'modified duration', which makes long-dated bonds more exposed to changes in interest rates. The underperformance of green bonds Morningstar compared two bond indices, one representative of green bonds and the other of more traditional bonds: the MSCI Bloomberg Global Green Bond Index and the Bloomberg Global Aggregate. The results show that green bonds have underperformed traditional bonds ...
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