There’s More Demand Than Supply for Green Bonds

There’s More Demand Than  Supply for Green Bonds

uring a GreenBiz 17 program mid February 2017, Dmitri Sedov, vice president of innovation and digital strategy at S&P Global, said the acquisition of Trucost would help solve a gap between the demand for sustainable investing and the supply of these investments.

A report in GreenBiz.com quoted Sedov as saying, “There is a verified interest on behalf of asset owners to put their money in something greener. How do we meet that demand with supply of available investments?”

Sedov said one of the first steps to help solve this imbalance is to create a unified system that looks at environmental risks similar to the way S&P Global Ratings look at credit risk.

“It’s not even a thought how you assess default risk. Well, you look at a credit rating,” said Sedov. “We need a system similar to that in sustainability.”

S&P has analyzed sustainability risks in the equity markets for a while with the S&P Dow Jones Sustainability Indices, which launched in 1999 as the first global sustainability benchmark.

The S&P Dow Jones Sustainability Indices selects companies based on long-term economic, environmental and social criteria as well as industry-specific sustainability trends.

Investment research companies and financial information providers are increasingly adding new ways to measure and gauge sustainability risks.

A recent report by Moody’s Investors Service projects that green bond issuances will increase to over $200 billion in 2017 from $93.4 billion in 2016 if green bonds grow at their 2016 rate.

S&P Global launched an initiative at evaluate bonds that might not necessarily be considered green bonds. Sedov gives the example of company initiatives in energy efficiency, which may not qualify the bond as a green bond, but is still something investors would want to know.

“We don’t really need to think of a bond being 100 percent green,” said Sedov.

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