Last updated: 11:41 / Monday, 5 April 2021
Positive environmental impact

NN IP Expands its Range of Green Bond Strategies with a New Sovereign Debt Fund

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  • The NN (L) Sovereign Green Bond has a specific focus on treasury and government-related bonds
  • The new vehicle comes just five years after NN IP launched its first dedicated green bond fund
  • The asset manager estimates that green bond issuance could increase this year by 50% from 2020 to 400 billion euros, putting the total market above the 1 trillion mark

NN Investment Partners has announced in a press release the launch of the NN (L) Sovereign Green Bond, a new fund adding to its green bond offering.

The asset manager said that this is the first sovereign bond fund aiming to have a positive environmental impact through the projects it finances. It complements its existing range of green bond funds, applying the same investment approach as the NN (L) Green Bond fund, but with a specific focus on treasury and government-related bonds.

The new vehicle comes just five years after NN IP launched its first dedicated green bond fund and only one year after launching a corporate green bond fund. Currently, they offer a full range of green bond funds: aggregate, corporate, sovereign, and an option for a fund with a shorter duration.

In their view, by having access to separate sovereign and corporate green bond funds, investors enjoy "maximum flexibility" to select the building blocks they need to make their fixed income allocation more sustainable with a measurable and positive impact.

“I am proud to be part of the development of an asset class that will play a key role in financing climate change mitigation and supporting the environment. Whilst in the past, investor demand for green bonds mainly came from impact investors, we now see more typical fixed income investors allocating to green bonds as well", commented Bram Bos, Lead Portfolio Manager Green Bonds at NN IP.

In his opinion, these investors are looking to make their portfolio more sustainable without sacrificing financial performance. "Offering a broad range of green bond strategies makes this even easier, as it allows them maximum flexibility to allocate to green bonds that replicate the characteristics of traditional bonds in their portfolio", he added.

An exponential growth

Lastly, NN IP highlighted that the launch of the sovereign green bond fund occurs at a time when the sovereign green bond market has seen significant growth in issuance, representing a diverse issuer base that they believe will continue to grow exponentially. Italy recently issued its inaugural green bond in March whilst Spain and the UK have also announced plans to issue their first green bonds in 2021, which will give the sovereign green bond market a further boost.

"These developments are creating a market that is well-diversified in terms of issuers and countries, which allows for a well-diversified portfolio with comparable characteristics to a regular allocation to treasuries", they pointed out.

The asset manager estimates that green bond issuance could increase this year by 50% from 2020 to 400 billion euros, putting the total market above the 1 trillion mark, and expects the global green bond market to grow to 2 trillion euros by the end of 2023. The announcement from the EU that 30% of the NextGenerationEU bonds (in total 800 billion euros) will be green supports NN IP’s forecast for market growth.

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