BOSTON--(BUSINESS WIRE)--State Street Global Advisors (SSgA), the investment management business of State Street Corporation (NYSE: STT), today announced its new High Quality Green Bond strategy which offers investors a way to direct fixed income investments to climate solutions.
Issued primarily by the World Bank, European Investment Bank, and other supranational and multilateral development banks, green bonds allocate the proceeds of the bond offering to fund environmentally beneficial development projects. In the past two years, the nascent green bond market from these issuers has grown from $1 billion to $5 billion outstanding. Overall, the estimate from all issuers of green bonds is approximately $12 billion¹.
“Investment managers are being asked more frequently by their clients to consider sustainability and environmental factors in their approach to the market,” said Chris McKnett, head of environment, social and governance (ESG) investing at SSgA. “The development of a green bond strategy as a complementary solution to our other ESG investment offerings was driven by increased market demand amongst investors.”
SSgA’s High Quality Green Bond Strategy seeks to approximate the duration of its duration benchmark – the Barclays Capital U.S. Treasury Index² – through investments principally in green bonds and other debt instruments.
Brian Kinney, global head of SSgA’s Fixed Income Beta Solutions commented: “This new offering is not only a significant milestone within our expanding line up of ESG investment solutions but also presents investors with a solid investment option as part of their overall fixed income allocation.”
SSgA will primarily invest in green bonds issued by supranational or multilateral development banks. These green bonds have similar financial features to standard bonds issued by these same organizations. They are of high credit quality and come from reputable issuers that are backed by large balance sheets and known institutions.
Eligible green bond issuers undertake extensive due diligence with the aim of financing projects that provide positive economic and environmental benefits. Projects financed by green bonds generally fall into one of two categories: those seeking to mitigate climate change or projects seeking to adapt to its effects.
"With the immense amounts of financing needed for countries to support their climate mitigation and adaptation activities, initiatives like green bonds that help raise funds from the private sector and increase awareness for these challenges are vital,” said Andrew Steer, Special Envoy for Climate Change, World Bank. “We welcome SSgA's efforts to provide their clients with fixed income products that help raise financing for climate solutions, and are happy to have played a catalytic role to the growth of the green bond market."
With more than $122 billion in overall ESG assets³, SSgA is one the world’s largest managers of ESG investments. The High Quality Green Bond Strategy is supported by the ESG team, comprised of five professionals with an average of eight years of experience overall and four years in an ESG capacity.
State Street is one of the world’s largest fixed income managers with $306 billion in assets4.
About State Street Global Advisors
State Street Global Advisors (SSgA) is a global leader in asset management. The firm is relied on by sophisticated investors worldwide for its disciplined investment process, powerful global investment platform and access to every major asset class, capitalization range and style. SSgA is the asset management business of State Street, one of the world's leading providers of financial services to institutional investors.
¹SSgA, Climate Bonds Initiative
²The Barclays U.S. Treasury Index is a trademark of Barclays Capital, Inc.
³June 30, 2011
4 September 30, 2011
Investing involves risk including the risk of loss of principal.
Bond funds contain interest rate risk (as interest rates rise bond prices usually fall); the risk of issuer default; issuer credit risk; liquidity risk; and inflation risk.
Derivative investments may involve risks such as potentially illiquidity of the markets and additional risk of loss of principal. There are a number of risks associated with futures investing including but not limited to counterparty credit risk, currency risk, derivatives risk, foreign issuer exposure risk, sector concentration risk, leveraging and liquidity risks.
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