One of Europe’s largest fund managers is urging the car industry to increase its adoption of green bonds to meet the EU’s ambitious car emissions target.
Netherland-based NN Investment Partners (NNIP), which manages around €268bn in assets, warned that despite green bonds being a crucial tool for financing the necessary shift electric cars, only one euro-denominated green bond has been issued by a car manufacturer.
This was a €600m bond issued by Toyota in 2017 to finance the sales of Toyota and Lexus models that meet emissions criteria in the US market.
The EU has set a target of reducing car emissions by 37.5% between 2021 and 2030. Car manufacturers that do not comply with the target will face substantial fines.
Meeting these goals will require billions of euros of investment in new technologies and car production facilities, NNIP said, with green bonds playing a key role.
The asst manager believes green bonds are the perfect vehicle to finance the building of dedicated production platforms for new electric vehicles and the installation of new re-charging points across Europe.
Bram Bos, lead portfolio manager of green Bonds at NN Investment Partners, said as auto manufacturers hold a vast pool of eligible green assets through their production of electric vehicles, there is strong potential to finance this transition with green bonds.
“This would greatly enlarge and diversify the green bond space. Sustainability-focused investors would also stand to benefit, as this would lower investment barriers within the green bond universe.
“In addition, green bonds represent a great investment opportunity, as we’ve found that investors face no additional costs when investing in green bonds. In fact, by investing in green bonds, investors can reduce the carbon footprint of their portfolios without sacrificing liquidity or returns,” Bos added.