Does Eco-Friendly Investing add Value to Bond Portfolios? - Lake Harding Association

Does Eco-Friendly Investing add Value to Bond Portfolios?

Does Eco-Friendly Investing add Value to Bond Portfolios?

By Micah Moen 0 Comment September 11, 2019


To fight climate change, the world needs to rely
more on renewable energy. The global landscape for
renewable energy production will evolve significantly
in the near future. However, engagement across
countries differs massively. The most traditional
and most common approach to construct global sovereign bond indices is to use a market capitalization
weighting approach, which gives a higher
weight to those countries with huge levels of debt outstanding. Countries with more capacity in the field of renewable
energy production get a higher weight in our index. That’s a benefit for
ecologically-minded investors and should have a positive impact on the performance of the
bonds of those countries. Research indicates a positive correlation between a country’s
renewable energy consumption and its economic growth. Consequently, investments
in renewable energy will help countries service
their debt in the future, and support the performance
of the index strategy.

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