Bloomberg

Investors Face Baffling $2 Trillion Rainbow of Ethical Debt

(Bloomberg) — Green bonds. Blue bonds. Brown bonds. Environmentally-conscious investors may soon be able to buy a different color of asset every day of the week.Record demand for sustainable finance is spurring this rainbow of debt types by governments and companies, to fund increasingly specific ways of mitigating climate change. While green bonds — which pledge their proceeds to finance wind farms or solar parks — are the dominant species, some of these labels have so far remained relatively niche.That’s set to change as a market now worth over $2 trillion develops rapidly, and as financial engineers create new ways to brand such debt. The greater choice is a boon for the growing cohort of specialist funds with ethical mandates, yet also creates more due diligence in an asset class already lacking clarity thanks to a lack of uniform standards.“It is confusing,” said Taimur Hyat, chief operating officer for PGIM, adding more universal rules and less fragmentation would be “extremely helpful” for PGIM to use its $1.5 trillion in assets to support the transition to a greener planet. “Clear guidelines will also avoid the risk for the perception for any greenwashing in the industry.”It’s only five years since the world’s first green sovereign debt was issued by coal-reliant Poland, to help
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