CONTRIBUTORS
David Zahn, CFA, FRM
Head of European Fixed Income
Shift Towards Sustainable Economies Makes ESG Investing More Relevant Than Ever Before
The significant impact of climate and environmental changes across the globe has become increasingly apparent, with the world about to record its warmest five years on record and warnings of a collapse in biodiversity.1 In financial markets, the result has been a corresponding increase in demand for investments that can help fund projects with positive environmental and/or climate benefits.
Green bonds made their first appearance in 2008 with an issue from the World Bank. Since then, growing concerns about greenhouse gas emissions and climate change have prompted a surge in environmental, social and governance (ESG) mandates and an increase in bond issuance to help finance climate-related projects. Green bonds have quickly become common across jurisdictions, industries and currencies. Today, European countries are taking the lead; several major governments, corporates and financial institutions have now issued green bonds, with others potentially to follow.
Subscribe for our latest Fixed Income updates
ENDNOTES
-
Sources: UN Environment Programme, “How Climate Change is Making Record-Breaking Floods the New Normal”, 3 March, 2020, The Nature Conservancy, Financing Nature Report, Closing the Global Biodiversity Financing Gap, 2020.
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments; investments in emerging markets involve heightened risks related to the same factors. To the extent a strategy focuses on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a strategy that invests in a wider variety of countries, regions, industries, sectors or investments. The technology industry can be significantly affected by obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants as well as general economic conditions. Smaller and newer companies can be particularly sensitive to changing economic conditions. Their growth prospects are less certain than those of larger, more established companies, and they can be volatile.
The companies and case studies shown herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The opinions are intended solely to provide insight into how securities are analyzed. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio. Factual statements are taken from sources considered reliable, but have not been independently verified for completeness or accuracy. These opinions may not be relied upon as investment advice or as an offer for any particular security. Past performance does not guarantee future results.