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Launch of green bonds

The term «Green Bonds» is more frequently used to describe a market that should mature very fast in order to deal with numerous requests for investments in the field of green infrastructure projects.

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What do the following amounts remind you of: 30 billion pounds, 1000 billion euros and 2.9 trillion dollars? £ 30 million is the amount, according to Ofgem (the regulator of electricity and gas markets in the United Kingdom), that should be invested over the next ten years by companies of U.K gas and electricity network to deal with environmental challenges but also to ensure supply. 1000 billion euros (one trillion) is the amount, according to Citigroup, that would be required over the next ten years to create in Europe a network infrastructure with low CO2 emissions. These two huge amounts now look quite ridiculous compared to the new amount that has been mentioned in a report released mid-February by Accenture and Barclays

This detailed report concluded that 2.9 trillion euros will have to be invested in transportation, energy and buildings sectors by 2020. The authors have split this amount as follows: 600 billion for investments related to new technologies developments. Such a small amount compared to the 2.3 trillion euros needed for the creation and supply of these infrastructures. Although these amounts are bigger enough to make one’s blood run cold, they are easier to digest once converted into a percentage of UK GDP: about 2%.

However, the financial crisis has led to the creation of a chasm that has significantly reduced development spending, in a context of political uncertainty and limited access to borrowing

The report urges financial sector companies to seriously consider the structures that will soon be developed to allow for sufficient capital allocation to the establishment of an infrastructure with "low carbon emission". The term "Green Bonds" is more frequently used to describe a market still relatively underdeveloped and immature, but that should mature very fast in order to deal with numerous requests for investments in the field of green infrastructure projects.

Governments will also have an important role to play in order to enable this market to emerge as soon as possible. In this context, the implementation of bold initiatives is needed, including the creation of a Green investment bank in the United Kingdom.

Henderson Global Investors have welcomed this initiative. We have also signed, with seven other British asset managers, an open letter to Prime Minister David Cameron supporting the creation of a Green Bank. Through this letter, we emphasize on the need for large investments required for the development of infrastructure with low-carbon emissions. Such an institution, designed in a strict regulatory framework, could play an important role in the establishment and acceleration of the investment sources needed. The bank could also play a key role in stimulating a more global market

George Latham , April 2011

Article also available in : English EN | français FR

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