Robeco, The Investments Engineers

Green Bonds

Leveraging a five-step proprietary process to mitigate greenwashing while creating a positive impact

Key points

  1. A proprietary framework to only select bonds with real and quantifiable impact

  2. Active strategy driven by active rate management, allocation and issuer selection

  3. Investing in active fixed income sustainably with a contrarian approach

A green bond is a bond that is specifically earmarked to raise money for climate and environmental projects. This strategy has been very successful with issuance over USD 1 trillion between 2015-2022. However, the term ‘green bond’ is not legally protected. That’s why Robeco uses a proprietary framework to select truly green bonds for its strategy.

Our approach

The Green Bonds strategy is actively managed with a diversified exposure to the green bond market. It aims to create positive environmental impact while generating outperformance relative to the Bloomberg MSCI Green Bond index over the long run. It exploits both active interest rate and credit strategies by investing in green bonds issued by governments, government-related agencies and corporates.

The outperformance target is based on three sources of return:

  1. Fixed income asset allocation

  2. Global rates

  3. Credit selection


Green bond investments are now an integral part of most Robeco fixed income strategies across our macro and credit portfolios. Our total investments in green bonds amount to more than EUR 3.5 billion (as of December 2021) and are expected to further increase.

Green bond framework

To ensure the bonds are truly green, Robeco uses a proprietary five-step bond selection framework to determine the eligibility of green bonds and ensure that these are in line with the most recent regulatory developments on sustainable finance. Only those green bonds that truly have an impact and adhere to internationally accepted principles are eligible for the portfolio.

The green bond framework is based on the following five criteria:

Framework alignment
01

Framework alignment

The issuer’s green bond framework is aligned with green bond market standards.

Allocation of proceeds
02

Allocation of proceeds

The proceeds of the green bond make a positive contribution to one of the six environmental objectives as defined by the EU Taxonomy.

Impact reporting
03

Impact reporting

The issuer reports at least annually on the use of proceeds and the contribution to the environmental objective.

Credible environmental strategy of issuer
04

Credible environmental strategy of issuer

Issuers that are not making significant steps towards becoming more sustainable are avoided.

Adherence to international norms
05

Adherence to international norms

For a green bond to be a sustainable investment, international norms related to social and governance issues must be met.

Team

The strategy is managed by two lead portfolio managers from Robeco’s Fixed Income team. This is an integrated team of over 50 professionals including credit, global rates, euro sovereigns, multi-asset and derivatives specialists who have, on average, 17 years of experience. These specialists include the macro strategists who track geopolitics and the policy and actions of the world’s major central banks. For the allocation to corporate credit we leverage the experience of Robeco’s Global Credit specialists, which includes seasoned portfolio managers, career analysts and green bond specialists. Robeco’s Fixed Income team has been investing in green bonds since 2013.

Sub-strategies

Green bonds are a fast-growing section of fixed income markets and the universe is now broad and liquid enough to manage diversified global and US green bond portfolios. We believe that further green initiatives and regulatory support will underpin a continued growth of the green bond market.

Sustainability

The strategy targets sustainable investments: it has sustainable investment as its objective and targets themes such as energy or mobility, the UN’s Sustainable Development Goals or climate change. Moreover, it follows a stricter exclusion list. Under the EU Sustainable Finance Disclosure Regulation it is classified as Article 9.

Ingredients

01

Impact

Investing that aims to generate beneficial social and/or environmental effects

02

Contrarian

Unmoved by market sentiment and herd behavior, and instead making decisions based on research, conviction and long-term focus

03

Stability

Team has long-term experience and low turnover

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