Allocating to Green Bonds

34 Pages Posted: 29 Mar 2021 Last revised: 2 Jun 2023

See all articles by Laurens Swinkels

Laurens Swinkels

Erasmus University Rotterdam (EUR); Robeco Asset Management

Date Written: November 17, 2021


Green bonds are about a decade old financial instrument with cash flows earmarked to improve the environment or combat climate change. We show the spectacular growth of the asset class over time, but note that it is currently still less than 1% of the entire fixed income market. The composition of the asset class has changed considerably over time. At the start, it were mainly very safe supranational institutions issuing in a variety of currencies with relatively short maturities. They were followed by corporates, especially utilities, and more recently also governments have started issuing green bonds. This change of composition leads us to conclude that historical data from before 2015 is less representative for the future. Our returns- and characteristics-based analyses show that an investor allocating to green bonds should finance this from an aggregate fixed income allocation to reduce the impact on the risk and return characteristics of the existing portfolio.

Keywords: Asset allocation, Bonds, Climate change, Environmental Social and Governance (ESG), Fixed income, Green bonds, Portfolio management, Socially Responsible Investing (SRI), Sustainable investing

JEL Classification: G11, G12, G14

Suggested Citation

Swinkels, Laurens, Allocating to Green Bonds (November 17, 2021). Available at SSRN: or

Laurens Swinkels (Contact Author)

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA

Robeco Asset Management ( email )

Rotterdam, 3000
+31 10 224 2470 (Phone)
+31 10 224 2110 (Fax)

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