Green, social and sustainability (GSS) bonds

The first green bond was issued in 2007 by the European Investment Bank, followed by the World Bank in 2008, to fund environmental projects. Since then, the market has rapidly evolved, particularly over the last decade, as investors and issuers have prioritized sustainability.

Social bonds emerged later, with notable growth after the Covid pandemic in 2020-2022, as issuers sought funding for health and social welfare programs. Sustainability bonds have also gained traction as issuers seek to address both environmental and social challenges simultaneously.

In November 2023, Brazil sold its first-ever green bond, intended to support plans to safeguard the Amazon. The US is one of the largest sources of green bonds, where state and local governments have used them to fund environmental infrastructure projects.

The GSS bond market has experienced exponential growth, expected to exceed USD 1 trillion in annual issuance by 2024 for the first time, according to S&P Global, driven by increasing regulatory support and investor demand for sustainable finance solutions.¹

Green bonds make up the largest share, but social and sustainability bonds are growing rapidly, reflecting a diversification of sustainability-focused financing. Governments, corporations, and supranational organizations are now among the major issuers of GSS bonds. Blue bonds have recently emerged as a form of GSS to finance projects that protect oceans and related ecosystems.

Green bonds are now an integral part of Robeco’s fixed income portfolios across both macro and credit strategies, with total investments exceeding EUR 3.5 billion and expected to grow further. In 2024, Robeco expanded its commitment to green bond investing by launching High Income Green Bonds. By combining active interest rate and credit strategies to provide diversification, it invests in securities issued by governments, government-related agencies, and corporates.
The fund leverages three main sources of return: fixed income asset allocation, global rates, and credit selection.

To ensure genuine impact and avoid greenwashing, Robeco uses a proprietary five-step green bond selection framework to make sure that the bonds are legitimately invested in environmental projects. This evaluates:

• Alignment with market standards

• The positive allocation of proceeds

• Credible impact reporting

• The issuer’s environmental strategy

• Adherence to international norms

Only green bonds that meet these stringent criteria and align with the latest sustainable finance regulations are eligible for portfolios, ensuring that investments drive real environmental change.

Frameworks like the International Capital Market Association’s Green Bond Principles and Social Bond Principles, and the EU’s European Green Bond standard also ensure transparency and credibility in the issuance and reporting process.

¹https://www.weforum.org/stories/2024/11/what-are-green-bonds-climate-change/

See also