- 2019 saw a total of 479 green bonds issued worldwide, up by a quarter compared to the previous year.
- And 2020 is set to be a “bumper” year for green bonds, according to Linklaters.
- Hedge fund managers are also feeling the ethical squeeze, with growing investor demand the key driver in hedge fund ESG investing.
A green revolution has been promised before, but if the latest data across all asset classes is to be believed, this time it is here to stay. Whether it’s in equities, government bonds, ETFs (exchange-traded funds) or hedge funds, investors around the world are demanding socially and environmentally conscious options.
In a letter to CEOs last month, BlackRock CEO Larry Fink said climate change has become a “defining factor in companies’ long-term prospects” with a significant reallocation of capital on the horizon a lot sooner than expected. And the numbers appear to back him up.
The next ‘mega trend’ in equities?
“For the first time since WWII we sense a shift in which climate and the environment — not growth — will become the priority of governments and their citizens, as shortages of food, clean water and air become existential questions,” Saxo Bank Chief Economist Steen Jakobsen said in his latest quarterly outlook report.
Jakobsen predicted that increasing climate awareness and the growing shift in policy and behavior, coupled with technological advancements lowering the cost of green technologies, makes green stocks increasingly attractive. “Governments will increase investments and subsidies for ‘green’ industries, starting a new mega trend in equity markets,” Saxo Bank Head of Equity Strategy Peter Garnry said in the report. “We believe that these green stocks could, over time, become some of the world’s most valuable companies — even eclipsing the current technology monopolies as regulation accelerates during the coming decade. Investors should consider tilting their portfolios towards green stocks so they don’t miss this long-term opportunity.”
Germany is unveiling plans to move entirely from coal to renewable energy by 2038, while China is the largest manufacturer and buyer of electric vehicles in the world. But the push toward ESG (environmental, social and governance) investing is not just about the potential returns, as consumer demand is tangibly outpacing the market.