The potential is huge
The UK has set ambitious goals for its climate agenda and thus far appears to be behind schedule. However, it is important that countries catch up on the green agenda to have a hope of meeting the timescales set in the Paris Agreement, and in UK’s case, their legislated climate targets. There are delays, but hopefully once details start to come through then the UK can accelerate its green agenda to meet the global targets, and the green gilt issuance is a signal that the government will deliver on its promises.
What does this mean for multi-asset investors?
We believe there will be significant demand for green gilts from sustainability-driven investors and this will cause these gilts to trade at a premium to their traditional counterparts. For us this means the product makes sense from both a fiscal and sustainable perspective. For our multi-asset strategies that are at the cautious end of the risk spectrum, allocating to gilts is an important part of the strategy. Although this initial issuance may appear to be a drop in the ocean of what is needed to finance the UK’s green agenda, it is a welcome start, and we expect to be switching a portion of our gilt allocations into the green gilt issuances.
