For many investors, “green bonds” still take getting used to. This raises many questions about the meaning, purpose and benefit for investors. Here are some answers.
“What is a green bond?
In principle, green bonds, which are called green bonds in the financial industry, are like conventional bonds. Structure, risk and return are comparable. The big difference is that green bonds are earmarked: the money that is redeemed with them must be used for ecological projects. This is primarily set out in the “Green Bond Principles” of the industry association ICMA. It says that the bond proceeds should “exclusively or partially finance or refinance exclusively green projects”. Such projects can serve to promote electromobility, reduce energy consumption or build wind turbines. The issuers of eco-bonds are also required to report regularly to investors about the projects and their sustainable impact. Experts advise that investors should not only look at the projects to be financed, but also whether the issuer is fundamentally sustainable. Opinions often differ: The French state is promoting nuclear power because it believes it is green.