Market Comment - Inverted US yield curve – but no recession in 2019 expected

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If we are to achieve the Paris Climate Accord’s goal of keeping changes in the earth’s temperature to two degrees or less, investment on a vast scale is needed in the energy, transport and water sectors. The EU estimates EUR 270 billion in additional infrastructure investment is required — and that is just Europe’s portion.

With EUR 100 trillion in assets, the financial sector offers huge potential for financing the transition to cleaner energy. Green bonds are one way that the capital markets are being put to work for society’s goals. A green bond is a bond where the proceeds are used to fund environment-friendly projects.

The first green bond was launched around ten years ago by the European Investment Bank. Since then, the market has expanded to include government and corporate issuers as well. But while growth has been fast — and total issuance since 2007 has totalled more than USD 500 billion — it is still a developing market.

We expect the green bond market to continue to grow, as more debt issuers realise the interest retail investors have in sustainable investing. We also expect more issuance as the frameworks for defining green bonds mature and the benefits of green bond financing attract more corporate issuers.

As with any investment, there are pros & cons to consider. But for investors interested in using their money to make a positive and tangible difference in the world, the growth of the green bond market can represent an attractive opportunity.