Treasury Management Internation Logo

Fitch: 2018 to be a pivotal year for European green bond funds


London – European green bond investment will reach a key milestone in 2018 as the first green bond funds attain their three-year track record, which many investors and intermediaries consider important when selecting funds, Fitch Ratings says. Nine funds with combined assets under management of about EUR1 billion are set to reach their three-year point in 2018.

Green bond funds are rapidly emerging as a sub-asset class in fixed-income funds as investor demand for “green” investments grows. We estimate that Europe-domiciled green bond funds totalled about EUR2.8 billion at end-2017, up nearly 40% on end-2016 (but still dwarfed by the wider fixed-income fund segment). Clearer regulatory classification of green bonds, likely later this year, could be another spur for investment.

Green bond fund investors may place significant weight on the green credentials of funds but “greenness” is not the sum total of their risk-return profile. Performance track records are still too short to draw meaningful conclusions but funds can be differentiated by credit quality. We estimate the fund credit quality rating of European green bond funds to be in the ‘BBBf’ to ‘Af’ range, based on our global bond fund rating criteria.

European green bond funds tend to underweight the highest-quality sovereign, supranational and agency exposures that dominate green bond indices, in favour of sectoral and issuer diversification, lower duration and yield.

We highlighted diversification as a challenge for green bond funds in 2017, with the sector still in its infancy and the limited issuance resulting in concentrations by sector and issuer, particularly where funds apply exclusion filters in addition to greenness. Diversification is increasing as issuance grows and is becoming comparable to broad fixed-income funds, but not corporate bond funds.

Additional information is available on



Most recent episodes

HSBC’s Sibos Spotlight: Investing in the Future – from Diversity to Green Deposits

In the final instalment of HSBC’s Sibos Spotlight, Eleanor Hill (TMI) invites Nadine Lagarmitte and Suraj Kalati (HSBC) to consider how corporates’ attitudes to...


HSBC’s Sibos Spotlight: The ESG Landscape – what every treasurer needs to know

In the third edition of HSBC’s Sibos Spotlight Podcast series, TMI’s Eleanor Hill invites Farnam Bidgoli (HSBC) to provide an in-depth overview of the current ESG...


The Path to Transformational Global Cash Visibility

Davina Bradley (CEVA Logistics) and Conor Deegan (CashAnalytics) join TMI’s Eleanor Hill to explore how treasurers can transform their cash visibility and forecasting within their business in a matter of weeks using a...


HSBC’s Sibos Spotlight: Embedding ESG in Trade and Supply Chains

In the second podcast from HSBC’s Sibos Spotlight series, TMI’s Eleanor Hill speaks to Surath Sengupta (HSBC) about embedding ESG into trade and supply chains....


Lost in Transaction: Overcoming Payments Pitfalls

From simple errors to duplicates, fraud and sanctions violations, there are a number of areas where payments can go wrong – especially in the real-time environment. In this podcast, TMI speaks to Andrew Ferrao...


HSBC's Sibos Spotlight: Central Bank Digital Currencies

The first edition of HSBC’s Sibos Spotlight series sees TMI’s Eleanor Hill joined by Mark Williamson and James Pomeroy (HSBC) to discuss the hot topic of Central Bank Digital Currencies (CBDCs). Our guests discuss...


Payments Vision 2025: The Inside Track

Wim Grosemans, Steven Lenaerts (BNP Paribas) and Wim Raymaekers (SWIFT) join TMI’s Eleanor Hill to outline their vision for the payments landscape in 2025. Our guests consider how recent developments such as instant...


Stepping Out from the Shadows

“Treasurers needs to step out of the shadows and into the sunshine in terms of their strategic contribution.” claims Zitah McMillan, Co-Founder and CEO, Predictive Black. In this podcast, hosted by TMI’s Eleanor Hill, our guest declares that the...


Why the ‘One Size Fits All’ Approach is Outdated - A Cash Segmentation Treasury Masterclass

With the ongoing low interest-rate environment and increasing regulatory change, it’s more important than ever for treasurers...


Instant Payments: Instant Rewards

TMI’s Eleanor Hill sits down in the virtual TreasuryCast studio with J.P. Morgan’s Global Head of Real-Time Payments, Cyrus Bhathawalla, to discuss how treasurers can capitalise on the evolving nature of real-time payments. Our guest contemplates the elements...