BIS launched a EUR-denominated, open-ended fund for green bond investments by central banks and official institutions, following the launch of the first BIS green bond fund denominated in USD in September 2019. ECB has decided to use part of its own funds portfolio to invest in this second BIS euro-denominated green bond investment fund for central banks (EUR BISIP G2). With this investment, ECB is contributing, within its mandate, to global efforts to promote environmental objectives and combat climate change.
Together, the two BIS green bond funds will manage some USD 2 billion in green bonds for central banks with the expectation that the funds will continue to grow considerably. The two funds are structured according to the Swiss law and belong to the BIS Investment Pool (BISIP) family, a format commonly used by BIS Asset Management for its fixed-income investment products. They are managed in-house by the BIS Asset Management. Eligible bonds have a minimum rating of A– and comply with the International Capital Market Association's Green Bond Principles and/or the Climate Bond Standard published by the Climate Bonds Initiative. BIS also produces an annual impact report for investors based on the information provided by the issuers of the bonds in which the funds invest.
The two BIS funds have been developed with the support of an advisory committee drawn from a global group of central banks. They are part of the BIS green bond fund initiative, which helps central banks to incorporate environmental sustainability objectives in the management of their reserves and capital, in line with a growing demand for climate-friendly investments among official institutions. The funds promote green finance through sizable investments in environmentally friendly projects such as renewable energy production and energy efficiency and support the adoption of best market practices and reporting standards to deepen the green bond market. The ECB investment in the EUR BISIP G2 is part of the sustainable and responsible investment strategy of ECB, which targets an increase in the share of green securities in its own funds portfolio. Such investment complements direct purchases of green bonds in secondary markets. ECB already holds green bonds amounting to 3.5% of its own funds portfolio, with a total market value of EUR 20.8 billion. ECB plans to increase this share over the coming years.
Keywords: International, EU, Banking, Green Bond Fund, Sustainable Finance, ESG, ECB, BIS
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