Green bonds are indeed a type of fixed-income instrument designed to fund projects that have positive environmental benefits. These bonds are typically asset-linked and backed by the issuing entity’s assets, IP, balance sheet, or other collateralized items, and are therefore considered just as secure as a traditional bond. Since they are often backed by the issuer’s balance sheet and carry the same credit rating as the issuer’s other debt obligations.
The term “green bond” is often used interchangeably with “climate bond”, but there is a subtle difference. While both are intended to finance environmentally friendly projects, climate bonds are specifically aimed at climate change mitigation projects, such as those that reduce carbon emissions. On the other hand, green bonds have a broader scope and can finance any project with a positive environmental impact.
Green bonds have been around since the early 21st century and have become an increasingly popular tool for raising funds for environmental projects. They represent a commitment from the issuer to future sustainability and environmental improvement. It’s a great way for investors to contribute to environmental causes while also receiving a return on their investment.
