Why Do Institutional Investors Buy Green Bonds: Evidence from a Survey of European Asset Managers

50 Pages Posted: 30 Mar 2021 Last revised: 31 Mar 2021

See all articles by Ivan Sangiorgi

Ivan Sangiorgi

ICMA Centre, Henley Business School, University of Reading

Lisa Schopohl

ICMA Centre, Henley Business School, University of Reading

Date Written: March 29, 2021

Abstract

Using survey evidence from European asset managers, we provide insights into their green bond investment activities and the factors that affect their investment decisions. We find that the majority of investors are actively invested in the green bond market via a variety of investment channels. Investors prefer green bonds issued from corporate issuers and sovereigns and we find that there is strong unmet investor demand for green bonds from these issuer types, in particular from non-financial corporates in the industrials, automotive and utilities sectors. Competitive pricing and strong green credentials, both pre- and post-issuance, are the most frequently named factors impacting respondents’ decision to invest in a green bond, and unclear and poor reporting on how bond proceeds are allocated to green projects induces a majority of investors to not invest in a green bond or to sell a bond if already included in the portfolio. Among policy measures to grow the green bond market, preferential capital treatment for low-carbon assets and minimum standards for green definitions receive the highest investor support, but respondents are divided whether a strict definition of ‘green’ or a less strict definition would be more beneficial for scaling up the green bond market.

Keywords: Green bonds, Institutional investors, Survey, Climate finance

JEL Classification: G23, M14, D22, Q2, G14

Suggested Citation

Sangiorgi, Ivan and Schopohl, Lisa, Why Do Institutional Investors Buy Green Bonds: Evidence from a Survey of European Asset Managers (March 29, 2021). International Review of Financial Analysis, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3814937

Ivan Sangiorgi

ICMA Centre, Henley Business School, University of Reading ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

Lisa Schopohl (Contact Author)

ICMA Centre, Henley Business School, University of Reading ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

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