River and Mercantile, Rathbones and Axa Investment Managers have confirmed their participation in the UK government’s first green gilt issuance.
The green UK government bond aims to help fund green projects including clean infrastructure, wind and hydrogen power.
As much as £10bn was raised from the sale of the gilt on 21 September 2022 and this will be followed by a second issuance later in the year.
Green gilts will raise a minimum of £15bn for green government projects this financial year.
Rathbones’ Bryn Jones (pictured), who manages the firm’s £2.6bn Rathbone Ethical Bond Fund, said: “The issuance is a positive initial signal, and it shows that the UK is on the right path, joining other countries issuing green bonds. We’ve been instrumental in pushing these bonds with the DMO over many years, so we’re pleased they have been issued at last.
“We have included the green gilts in the portfolio to manage duration and liquidity, whilst providing vital financing to future growth of the green economy and supporting the race to net zero carbon emissions.”
Jones added that he expects this year’s bonds to encourage the issuance of green bonds by more companies as they recognise the strong demand for such securities.
Axa IM also lined up to take part in the UK government’s inaugural green gilt issuance, a move it said is in line with its climate framework and market standards.
“The eligible project categories are directly linked to the green strategy of the UK, with the issuer committing to publish all relevant output and impact KPIs, including those related to associated social co-benefits of green projects,” said Mark Healy, portfolio manager at Axa Investment Managers.
“Moreover, the green projects impact reporting has been developed in cooperation with external experts showing the time and resources that have been used to develop the gilt,” he said.
River and Mercantile adds green gilts to LDI strategy
Meanwhile, the derivatives team at River and Mercantile will start to incorporate green gilts in client portfolios as part of the firm’s liability driven investment strategy (LDI), based either on clients’ preferences as asset owners, or River and Mercantile’s own view.
Mark Davies, managing director of derivatives at River and Mercantile, said: “As the manager of pension schemes’ liability hedges, we believe that green gilts offer pension schemes a potentially low-cost and simple governance approach to demonstrate a contribution towards meeting the Paris Agreement, as we know they will be directly invested into green projects.”
To enable the team to participate in the green gilt issuance, it swapped out non-green gilts of a similar maturity.
