The European Union's potential green bond issuance has caught the attention of investors, not only for the financial and sustainability opportunities it presents but also for its wider impact on the market.
Green finance will make up around 30% of the European Commission's €750 billion ($888 billion) plan to help Europe recover from the coronavirus pandemic. Market participants expect this financing to come in the form of about €225 billion of green bonds — making the European Union the largest issuer in the world of these instruments — with proceeds earmarked for climate or environment-related projects.
Institutional investors and money managers are discussing the potential issuance and will look to invest — depending on pricing and structure.
ATP, Hilleroed, Denmark, has close to 30 billion Danish kroner ($4.8 billion) invested in green bonds within its liability-hedging portfolio. Executives at the 918 billion kroner pension fund are focused on "high-rated supranationals and 'govies' within our green bond portfolio," said Lars Dreier Kristensen, director, portfolio manager. "If the EU green bonds are presumably coming with the same credit quality as current EU bonds, from that metric they would fit into the portfolio. But we also put a layer of ESG metrics on top — we have to measure that before we make a final decision on whether (the EU green bonds are) interesting or not."
A spokeswoman for the 293.3 billion kroner Sampension, Hellerup, Denmark, said the fund has more than 1 billion kroner in green bond investments. "We are likely participants in EU green bond issues," she said.
A number of money managers also said they would consider investing in the EU's issuance.
"I can't say if we will invest in it as it is still under development, but we will definitely have a close look at it and I would expect that, if this develops, then there is a very good chance we would ... invest in it, depending on pricing," said Michiel De Bruin, portfolio manager, global macro fixed income at Robeco Institutional Asset Management BV in Rotterdam, Netherlands. Robeco ran €1.7 billion in green bond assets as of April 30.