For mutual fund investors, taxes are inevitable. Even if you’re a long-term buy...
Welcome to MutualFunds.com
Please help us personalize your experience and select the one that best describes you.
Your personalized experience is almost ready.
Check your email and confirm your subscription to complete your personalized experience.
Thank you for your submission
We hope you enjoy your experience
Fixed income news, reports, video and more.
Municipal bonds news, reports, video and more.
Practice management news, reports, video and more.
Portfolio management news, reports, video and more.
Retirement news, reports, video and more.
Learn from industry thought leaders and expert market participants.
Deepen your understanding of Responsible Investing and learn how it can potentially help you build a more successful practice.
18 Most Popular Mutual Fund Categories
View All Categories
15 Most Popular Fund Companies
View All Fund Companies
15 Most Popular Fund Company Quick Screens
View All Fund Company Quick Screens
Receive email updates about fund flows, news, upcoming CE accredited webcasts from industry thought leaders and more.
Content focused on helping financial advisors build successful client relationships and grow their business.
Content geared towards helping financial advisors build better client portfolios.
Get insights on the industry trends and investment news from leading fund managers and experts.
As the name implies, a green bond is a bond whose proceeds are used to finance environment-focused projects. This relatively new segment of the bond market collects proceeds for projects related to energy efficiency, clean water, habitat restoration, combating climate change and other related matters. While many bond funds invest a portion of their proceeds in environmentally-friendly projects, a green bond fund is solely committed to these initiatives.
Green bond funds usually carry the same credit rating as the issuers’ other outstanding debt obligations, which means environment-focused projects do not necessarily involve more risks than traditional bonds.
Interestingly, the World Bank was the first organization to issue a green bond back in 2008. The international finance institution has since issued over $3.5 billion in debt aimed specifically at combating climate change.
Ginnie Mae and Fannie Mae have embraced this model by issuing mortgage-backed securities with the “green” label. U.S. municipalities and the European Investment Bank have also issued bonds for environment-specific projects.
Learn more about characteristics of bond funds here.
From the perspective of issuers, green bonds attract a new subset of investors, which means higher demand for their debt obligations. Higher demand for bonds typically lowers the borrowing costs.
The market for green bonds is also growing, which means more diversification benefits for investors. Case in point: the monetary value of outstanding green bonds exceeded $41 billion in 2015 from less than $36 billion two years earlier, according to Institutionalinvestor.com. According to Philippe Le Houérou, CEO of International Finance Corporation (IFC), the global market for green bond funds totaled $155 billion in 2017. However, it is not clear which definition of green bonds he used to arrive at that total (more on that below).
Liquidity and selection constraints also mean that green bonds are more appropriate for investors who are willing to hold the fund until maturity. Bond investors who like the option of selling their holdings before maturity will run into difficulty with these assets.
Another risk to consider is a lack of clarity on what exactly constitutes a green bond. As we mentioned at the outset, several funds direct proceeds to some form of environmentally sustainable initiatives but the extent to which they do so will determine whether they fall under the classification of a green bond. Investors must, therefore, perform extra due diligence when evaluating funds with the “green” label.
Be sure check our News section to keep track of the recent fund performances.
The fund will invest in climate-smart initiatives in emerging markets, with proceeds deployed through 2025 and reinvested every seven years.
Sign up for our free newsletter to get the latest news on mutual funds.