French asset manager Amundi to create high-yield green bond market through US$1.42 billion fund
Fund expects to increase allocation in green bonds by up to 100pc by 2025, with help from IFC
As high-yield green bond issuances in Asia remain scarce, Eric Brard, head of fixed-income at French asset manager Amundi, says the company’s collaboration with the International Finance Corporation (IFC) in setting up a US$1.42 billion green bond fund represents a joint effort to “create a market for it”.
Amundi Planet Emerging Green One, which is the world’s largest emerging market-focused green bond fund, had US$1.38 billion in assets under management at the end of May, according to the fund’s latest fact sheet. Of this, only 13.63 per cent was invested into green bonds. Subscription for the fund closed in February.
Brard, however, said the fund was going through a ramp up period, during which it will step up its allocation into green bonds, up to 100 per cent by 2025, the end of the fund’s investment period.
“We are serving the role of reconciling the flow of savings that is going to be invested in emerging market green projects that do not even exist today. This capital will be an additional source of financing for green infrastructure in emerging markets. This is a market we need to create,” said Brard.
As opposed to a conventional bond fund, where a manager invests in existing liquid asset classes, the challenge for this fund is that green bonds, particularly those issued by banks in emerging markets, are still a nascent asset class.
According to Bank of America Merrill Lynch, capital expenditure in Asia directed at climate change mitigation will need to increase to US$500 billion by 2030, from US$275 billion this year.
In Asia, the portfolio will exclude bonds issued in Japan, South Korea, Singapore and Australia, which are not emerging market economies as defined by the fund’s issue document. Both investment and non-investment grade bonds will be included.