The rise and fragmentation of sustainable bonds (Roundtable 'Green, Blue & Orange Bonds' – part 1)
This report was originally written in Dutch. This is an English translation.
The market for sustainable bonds is growing rapidly, but at the same time it is becoming increasingly fragmented due to new labels such as blue and orange bonds. In part 1 of this roundtable discussion, experts discuss the lessons learned from green bonds, the risk of overregulation, and the role of social bonds within ESG strategies.
By Manno van den Berg
This is part 1 of the report. Part 2 will be published on Thursday 4 December, part 3 on Friday 5 December.
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MODERATOR: Sevinç Acar, NN Group
PARTICIPANTS: John Amoasi, Neuberger Berman Michiel de Bruin, Robeco Gwennaële Bruning, Achmea Investment Management Robbert Lammers, MN Anahi Machado, DPAM Mitch Reznick, Federated Hermes Jessica Zarzycki, Nuveen Fixed Income |
What lessons can we learn from green bonds for other impact bonds, such as blue bonds, transition bonds, social bonds, and orange bonds?
Gwennaële Bruning: 'The most important lesson is that you need a strong institutional framework. ESG regulations, particularly the EU taxonomy, were instrumental in the growth of green bonds. A similar taxonomy would also be extremely useful for social bonds.'
Mitch Reznick: 'Regulation can indeed give the capital markets the confidence they need to scale up. However, overregulation can also create barriers. That is my concern with the EU taxonomy. I would rather have an imperfect market with sufficient scale, where investors themselves decide on bonds that do not meet certain criteria, than a perfect but too small market.'
Jessica Zarzycki: 'Take a step back and consider why green bonds have been so successful, namely because of the ability to invest capital in specific projects and measure the results of that investment. This is different from stock markets. Labeled bonds are a powerful tool for scaling up. I agree with my predecessor: overregulation can hinder innovation and growth. If we had waited for regulations or a taxonomy, we would never have invested in the first blue bonds issued by governments or in projects related to biodiversity and nature conservation. Fixed income is one of the best ways to achieve impact and scale up capital.'
Anahi Machado: 'One of the lessons is that it’s not just about the underlying investment project, but also about the credibility and commitment of the issuer. In addition, performance is always important in the fixed-income market. To attract sufficient capital, not just niche capital, you have to deliver performance.'
How do social bonds fit into an ESG or impact investment strategy? What role can they play for pension funds and their objectives?
Robbert Lammers: 'They are one of the instruments in the toolkit for achieving these goals. They allow you to clearly define the financing and provide a starting point for discussions with companies. In addition, the frameworks for labeled bonds help to identify and define projects and investments that best support our social or environmental goals.'
Michiel de Bruin: 'Social bonds can play a crucial role in tackling one of the biggest problems we face today: the lack of housing. They are also highly scalable. In terms of performance, I have been investing in green bonds since 2012 and the results have never disappointed. Green bonds have delivered a similar performance to non-labeled, similar bonds. That is an important conclusion.'
Green bonds have delivered similar performance to unlabeled, similar bonds. An important conclusion.
Bruning: 'Indeed, financial results are important. But social bonds also offer pension funds an accessible path to a multitude of social projects, from healthcare to access to clean water, affordable housing, and various forms of social cohesion. The credit quality is solid: generally investment grade, comparable to green bonds.'
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Sevinç Acar Sevinç Acar is Head of Public Markets at NN Group. In this role, she is responsible for the public fixed-income products and equities in the company's investment portfolio. Prior to this, she was Investment Director Fixed Income at PGGM. She holds a Master's degree in Business Economics from Maastricht University. |
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John Amoasi John Amoasi, Senior Vice President, joined Neuberger Berman in 2022 as Stewardship & Sustainable Investing Specialist within the Emerging Markets Debt team. Previously, he worked at Franklin Templeton as a Senior Sustainable Investment Specialist and at Legg Mason, Goldman Sachs and PIMCO as a Fixed Income Product Specialist. He holds a Master's degree in Chemical Engineering from UCL, is a CFA Charterholder and holds the CFA ESG Investing certificate. |
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Michiel de Bruin Michiel de Bruin is Head of Global Macro and Portfolio Manager at Robeco, responsible for the green bond, global aggregate and euro government bond funds. With over three decades of experience, he has held various management positions at BMO Global Asset Management in London and Deutsche Bank in Amsterdam. He is a CEFA charterholder and holds degrees from VU Amsterdam and Amsterdam University of Applied Sciences. |
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Gwennaële Bruning Gwennaële Bruning has been Head of the Credit Team at Achmea Investment Management since 2014. Under her leadership, various credit and impact-oriented strategies have been developed. From 2009 to 2014, she worked at Achmea Group, where she was responsible for the fixed-income portfolios of the insurance companies. Previously, she worked at AXA Investment Managers and NN Investment Partners. Bruning studied Economics at the University of Amsterdam. |
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Robbert Lammers Robbert Lammers is Senior Advisor Responsible Investment and has been working at MN since 2018. As a specialist in ESG integration and impact investments within the One Portfolio team, he is closely involved in the fiduciary advice and management of pension funds' fixed income portfolios. Lammers studied International Political Economy in Groningen and previously gained experience at TKP Investments. |
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Anahi Machado Anahi Machado joined Degroof FMC, the predecessor of DPAM, in 2011 as a fixed income fund manager. Prior to that, she worked at BNY Mellon as a Market Controller Corporate Actions. Machado began her career in 2005 at Eurochambers as a Financial Analyst. She holds a Master's degree in Management Sciences from the Louvain School of Management. Machado also holds the ICMA Fixed Income Certificate. |
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Mitch Reznick Mitch Reznick joined Federated Hermes in February 2010 as Head of Research within the Credit team, before becoming Co-Head of Credit from 2012 to 2019. In 2019, he also became Head of Sustainable Fixed Income and co-manager of the Federated Hermes Global High Yield Credit Engagement Fund. In May 2024, Reznick was appointed Group Head of Fixed Income – London. |
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Jessica Zarzycki Jessica Zarzycki is Lead Portfolio Manager for the Global Core Impact strategy and co-Portfolio Manager of the Global Credit Impact, U.S. Core Impact Bond, Green Bond and Short Duration Impact Bond strategies at Nuveen Fixed Income. She was a member of the ICMA Advisory Board, which advises the Executive Committee, in 2020–2021. She is also a member of the Steering Committee for the Orange Bond Principles. |
