Barclays and MSCI, a provider of investment decision support tools worldwide, have announced an agreement to launch a new Green Bond Index, expanding on their Environmental, Social and Governance (ESG) fixed income benchmark index family launched in June 2013.
The Green Bond Index is intended to reflect the fixed income market funding projects and initiatives with direct environmental benefits. These indexes may serve as a benchmark for dedicated Green Bond funds as well as informational measures of Green Bond risks and return.
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The Green Bond Index will be available for institutional clients to license for their index-linked investment products, such as Exchange Traded Funds (ETFs), separately managed accounts, and structured products.
"With an increase in Green Bond issuance, we have seen demand from institutional investors for a new benchmark in this emerging and rapidly growing market," said Brian Upbin, Head of Benchmark Index Research at Barclays.
"A Green Bond Index is a logical extension of the Barclays and MSCI fixed income index family that integrate ESG criteria in their design."
From now until July 31, 2014, MSCI and Barclays will open a formal consultation period to solicit feedback from the market. This consultation is intended to ascertain how the market identifies, evaluates, and classifies green bonds to help determine an appropriate benchmark index methodology.
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By GlobalDataRemy Briand, Managing Director and Head of MSCI ESG Research, said, "MSCI ESG Research offers institutional investors an independent and objective evaluation of Green Bond securities with an aim to meet well defined criteria for Green Bond classification."
"According to the Climate Bond Initiative, approximately US$30-40bn of green bonds will be issued this year, increasing to around US$100bn next year," said Jim Glascott, Global Head of Debt Capital Markets at Barclays. "The creation of a Green Bond Index will be an extremely useful tool for issuers and institutional investors and an important step in the evolution, transparency, and standardization of the Green Bond market."
