NN (L) Green Bond exceeds 1.0 bn euros, saves 547,505 tonnes CO2
Green bond's total strategy assets under management including mandates is 1.5 billion euros; employs an impact investing strategy
The rapid growth of the green bond market has resulted positive ecological impact and significant CO2 savings. This is exemplified by the development of the NN (L) Green Bond fund, which passed the 1 billion euros in assets under management (AUM) milestone in July 2019, only three years after its launch in 2016. Because of its current size of 1.03 billion euros, the fund now saves 547,505 tonnes of CO2 annually.
For every one million euros invested, the CO2 emissions of 534 tonnes saved by the fund are equivalent to the average annual emissions of 214 passenger cars, while for the portfolio as a whole, the renewable energy capacity added is equivalent to that generated by 113 wind turbines (as per end-July 2019).
The fund also surpassed one billion euros in assets under management, bringing the total strategy AuM including mandates to 1.5 billion euros as of end-July 2019.
The NN (L) Green Bond fund employs an impact investing strategy: it invests only in bond opportunities that combine attractive financial returns with a clear and measurable positive environmental impact. In addition to the environmental impact stemming from its CO2 savings, the strategy has outperformed from a financial perspective in every calendar year since its launch.
Since inception, it has achieved an annualized outperformance of 0.63% (gross of fees) against the benchmark (4.25% for the Green Bond fund, versus 3.62% for the benchmark, as at end-July 2019). Additionally, it is ranked in the top decile in its peer group.
Bram Bos, lead portfolio manager Green Bonds at NN Investment Partners, comments, “Since inception of the fund in 2016, we have been focusing on ‘dark green’ bonds, which we believe are the primary choice for investors willing to prioritize sustainability in fixed income.
Allocation to this asset class enables investors to reduce the carbon footprint of their fixed income portfolios and provides protection against climate risk without sacrificing liquidity and returns. In addition, we observe that these bonds offer better governance and greater transparency due to a higher level of engagement with issuers and stricter reporting requirements.”
NN IP’s “dark green” investment approach ensures that investments are truly green. NN IP’s green bond team seeks out projects that make a measurable positive contribution to the United Nations Sustainable Development Goals (SDGs), particularly climate change mitigation and climate change adaptation.
NN IP is also committed to excluding investment opportunities that run counter to its sustainability goals. For example, NN IP does not invest in green bonds that finance fossil fuel projects. NN IP also assesses both the bond and the issuer – engagement and dialogue with the issuer are crucial to the overall assessment. Additionally, NN IP meets and engages with each issuer in the portfolio to understand how the green bond fits in the company’s strategy, and how projects develop.
The growth of the fund was supported by improved liquidity in the green bond market, which was spurred by issuers raising almost as much debt in the first half of 2019 as all of 2018. This brought the global green bond market to 440 billion euros, up from 335 billion euros a year ago.
The record activity was earmarked by substantial issuance of corporates and sovereigns. The number of regular green bond issuers is also increasing, creating a stable supply of green securities and improving trading activity in the secondary market.
The green bond market’s expanding issuer base, in both geographic and sector terms, has helped this asset class establish itself as a viable choice for fixed income investors wishing to make a positive impact. NN IP expects this development to continue and even accelerate as the world we live in becomes ever more connected and investors become more aware of the potential impact of their choices.
NN (L) Green Bond is a sub-fund of NN (L) (SICAV), established in Luxembourg. NN (L) (SICAV) is duly authorised by the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg.
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