Are you planning on investing in green bonds? Here is what you need to know

 A green commitment is a commitment whose proceeds are used to fund environmentally friendly projects. These normal new types of bonds increase in popularity from the perspective of investors at an exponential rate. 

The issuance of green bonds in 2019 was $ 254 billion - the first recognized green commitment was issued in 2008. The number of green bonds is expected to continue to rise as attention builds and more investors become concerned about climate change. Although they are a fairly new segment in the bond market, investors will in the coming years certainly hear about the environmentally conscious offerings that define green bonds.

Green bonds help environmentally friendly projects

Green bonds are designed to help the environment by directing parts of the capital raised to projects related to clean water, renewable energy, energy efficiency, restoration of rivers and habitats or mitigation of climate change effects. 

Many bond funds invest part of their capital for such reasons, but green bonds are the ones specifically invested in environmental initiatives, while providing credit ratings similar to other funds. Green bonds typically have the same credit rating as their issuer's debt obligations.

The benefits of investing in green bonds 

Green bonds provide investors with a way to earn tax relief with the benefit of knowing that the proceeds of their investment are being used in a responsible, positive way. Issuers of green bonds also benefit, as the green angle can help attract a new subgroup of younger investors - which issuers can benefit from over a longer period of time.

Greater demand for green bonds corresponds to lower borrowing costs. Lower borrowing costs mean reduced expenses, which are either transferred to the investor in the form of a dividend or used to lower the operating costs of exchange traded funds (ETFs) or bonds.

Green bond criteria 

The specifications for what constitutes a green investment are somewhat open to interpretation, although the definition is tightened as the market expands, as more bonds are issued on a regular basis. 

In general, it is reasonable to expect that green bonds will provide long-term returns in line with government questions, given that their cash flows generally come from government-sponsored projects and the subsequent protection associated with municipal projects. 

In the short term, the result may be somewhat lower than government debt due to the lower liquidity of green bonds. As more green bonds are issued (or climate bonds, as some refer to them), liquidity will cease to be a major problem.

Seek inspiration and advice from specialists

If you decide to start investing in green bonds you should foremost seek inspiration and advice from specialists in the field. Recently i read an article published by OMNIA Global, the entrepreneurial family office founded by Daniel Hansen. 

OMNIA Global are specialists in green investments and their article focuses on the UN's 17 Sustainable Development Goals which all works towards a united goal decreasing poverty, inequality, climate changes, environmental degradation, peace and justice. 

With ONNIA Global Daniel Hansen aims to create and develop - wether it is an idea, an innovative financial solution or a company. OMNIA Global are specialists in private equity, strategic investments, fine art, business development, capital markets and real estate.