02 Jun 2021

Expert’s View: Green bonds make climate action simple


With rising acceptance of climate change—and an increasingly firm hand from regulators—many investors are turning to ‘green’ bonds to fund pro-climate projects. In our latest  Expert’s View, we investigate the diversification benefits of adding green bonds into a portfolio, and review their performance drivers.

Facts and Overview

  • Green bonds are designed to raise funds to finance eco-friendly projects. They are backed by the issuer’s balance sheet, and most are investment grade quality.
  • The green bond market is small in relation to the overall bond market. But it’s fast growing, and fundamental drivers look stronger than ever.
  • Green bonds are benefiting from rising investor demand for green assets, policymakers aligning with the Paris Agreement goals, and companies looking to transform their operational and product models.

Our key takeaways

  • Use of proceeds:  In 2020, most of the proceeds of green bonds were invested in energy, building, and transportation projects.
  • The ‘greenium’:  Most green bonds issued last year came with a yield level lower than or equivalent to conventional bonds, suggesting investors are in search of quality, labelled green bonds.

Chart 1: Green bonds – diversification and performance in a fixed income portfolio  

green bond performance

Sources: Lyxor International Asset Management, Bloomberg. Data as at 30/04/2021. Base date 28/02/2017. Past performance is not a reliable indicator of future returns.

Our green bond ETFs at a glance 


We believe that green bonds are a crucial part of the climate transition and we’re fully behind the campaign to #shiftthetrillions in debt markets into green investments. You can join the journey with our range of SFDR 9 compliant green bond ETFs. We’ve written before about what a positive impact can be achieved at a (relatively) small scale. Now imagine what more we could achieve if the vast potential of the bond market shifted to green investments! As greener investing becoming the norm, it’s no longer “why?” – it’s “why not?”

Please get in touch if you’d like to learn more, or visit our ESG Hub to explore Lyxor’s full range of green and ESG bonds. In the meantime, have a look at our green bond range below:

This article is for informative purposes only, and should not be taken as investment advice. Lyxor ETF does not in any way endorse or promote the companies mentioned in this article. Capital at risk. Please read our Risk Warning below.

Risk Warning

This document is for the exclusive use of investors acting on their own account and categorised either as “Eligible Counterparties” or “Professional Clients” within the meaning of Markets in Financial Instruments Directive 2014/65/EU. These products comply with the UCITS Directive (2009/65/EC). Société Générale and Lyxor International Asset Management (LIAM) recommend that investors read carefully the “investment risks” section of the product’s documentation (prospectus and KIID). The prospectus and KIID are available free of charge on www.lyxoretf.com, and upon request to client-services-etf@lyxor.com.

Except for the United-Kingdom, where this communication is issued in the UK by Lyxor Asset Management UK LLP, which is authorized and regulated by the Financial Conduct Authority in the UK under Registration Number 435658, this communication is issued by Lyxor International Asset Management (LIAM), a French management company authorized by the Autorité des marchés financiers and placed under the regulations of the UCITS (2014/91/EU) and AIFM (2011/61/EU) Directives. Société Générale is a French credit institution (bank) authorised by the Autorité de contrôle prudentiel et de résolution (the French Prudential Control Authority). Lyxor International Asset Management (LIAM) is registered in the public register of the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten) as a manager (beheerder) of a UCITS.

The products mentioned are the object of market-making contracts, the purpose of which is to ensure the liquidity of the products on the London Stock Exchange, assuming normal market conditions and normally functioning computer systems. Units of a specific UCITS ETF managed by an asset manager and purchased on the secondary market cannot usually be sold directly back to the asset manager itself. Investors must buy and sell units on a secondary market with the assistance of an intermediary (e.g. a stockbroker) and may incur fees for doing so. In addition, investors may pay more than the current net asset value when buying units and may receive less than the current net asset value when selling them. Updated composition of the product’s investment portfolio is available on www.lyxoretf.com. In addition, the indicative net asset value is published on the Reuters and Bloomberg pages of the product, and might also be mentioned on the websites of the stock exchanges where the product is listed.

Prior to investing in the product, investors should seek independent financial, tax, accounting and legal advice. It is each investor’s responsibility to ascertain that it is authorised to subscribe, or invest into this product. This document is of a commercial nature and not of a regulatory nature. This material is of a commercial nature and not a regulatory nature. This document does not constitute an offer, or an invitation to make an offer, from Société Générale, Lyxor Asset Management (together with its affiliates, Lyxor AM) or any of their respective subsidiaries to purchase or sell the product referred to herein.

Research disclaimer

Lyxor International Asset Management (“LIAM”) or its employees may have or maintain business relationships with companies covered in its research reports. As a result, investors should be aware that LIAM and its employees may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Please see appendix at the end of this report for the analyst(s) certification(s), important disclosures and disclaimers. Alternatively, visit our global research disclosure website www.lyxoretf.com/compliance.

Conflicts of interest

This research contains the views, opinions and recommendations of Lyxor International Asset Management (“LIAM”) Cross Asset and ETF research analysts and/or strategists. To the extent that this research contains trade ideas based on macro views of economic market conditions or relative value, it may differ from the fundamental Cross Asset and ETF Research opinions and recommendations contained in Cross Asset and ETF Research sector or company research reports and from the views and opinions of other departments of LIAM and its affiliates. Lyxor Cross Asset and ETF research analysts and/or strategists routinely consult with LIAM sales and portfolio management personnel regarding market information including, but not limited to, pricing, spread levels and trading activity of ETFs tracking equity, fixed income and commodity indices. Trading desks may trade, or have traded, as principal on the basis of the research analyst(s) views and reports. Lyxor has mandatory research policies and procedures that are reasonably designed to (i) ensure that purported facts in research reports are based on reliable information and (ii) to prevent improper selective or tiered dissemination of research reports. In addition, research analysts receive compensation based, in part, on the quality and accuracy of their analysis, client feedback, competitive factors and LIAM’s total revenues including revenues from management fees and investment advisory fees and distribution fees.