Advisors interested in socially responsible investing should not limit themselves to stocks as the only asset class to capitalize on environmental, social and corporate governance (ESG) standards or social impact initiatives such as serving poor communities. They should also consider SRI bonds, most commonly known as green bonds.
That market is surging and poised to double in size this year to $175 billion to $185 billion, according to a new report from Bank of America Merrill Lynch. A Chinese bank, Shanghai Pudong Development Bank Co Ltd, is the single biggest corporate issuer of a green bond this year, having sold $5.33 billion worth of debt. In the U.S. the biggest corporate green bond issuer is Apple, which issued $1.5 billion worth of green bonds.
“Apple has been one of the most ground-breaking [issuers] — being the largest single Green Bond issued by a US corporation and the largest from a non-pureplay corporate,” the authors of the Bank of America Merrill Lynch report wrote. “This could potentially open the floodgates for other major companies to enter the market.”
Apple has said it will use the proceeds from the bond sale to finance clean energy projects throughout its global operations including the use of more renewable energy sources, environmentally friendly materials in its products and processes and energy-efficient processes.
Stephen Liberatore, the managing director of TIAA Global Asset Management, says demand for green bonds “is coming from a very broad swath of investors, from endowments, pension funds, high net worth individuals, family offices” and increasing among millennial investors and female investors.
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Despite the growing demand many investors “are really unaware of what is available to them in this space,” says Liberatore, who manages the $750 million TIAA-CREF Social Choice Bond Fund (TSBHX), which has a five-star Morningstar rating, as well as other socially responsible fixed income portfolios. He suggests that advisors “do more education to let investors know what’s available.”