The energy transition and climate mitigation efforts are supportive of the growing green bonds market, but investors should not overlook opportunities in ‘brown' industries.
High-carbon emitting ‘brown' industries are often excluded from sustainable finance markets, but they can often produce a lion's share of potential for CO2 emission reductions. Investment in the space will have a significant impact in transitioning these traditional brown industries from being climate negative to being climate positive.
"In steel manufacturing, the technology is there for using sustainable energy, the capital just has to be invested for that transition," says Nikko Asset Management's Steven Williams, speaking on Investment Talks, Green Bonds.
Additionally, tax incentives, such as the Inflation Reduction Act in the US, are expected to have a significant impact in terms of meeting net zero targets by helping these traditional brown industries re-adjust. Many of these industries are mature, and traditionally financed by debt, and green bonds could play a significant role in transitioning infrastructure and capital over to more sustainable methods.
Investment Week explores how investors can harness the the opportunity to move the needle when it comes to our transition to net zero and what the future for green bonds holds. Click below to watch.