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Aligning Impact with Income: The Next Generation of Green Bond Indices Are green bonds a new asset class?

When S&P DJI's first green bond indices, such as the S&P Green Bond Index, where launched in 2014, the flurry of new products related to the indices was seen as a key indicator that the green bond market was rapidly scaling new heights.

Since then, market growth, asset owner commitments, new principles and taxonomies, and the diversification of types of issuers and issuances have added gravitas to fixed income instruments with a green and socially responsible focus. These indices might have been perceived as niche, but they had never left the mainstream.

In 2017, S&P Dow Jones Indices is once again at the forefront of establishing further green bond momentum - this time through secondary market growth. The more recently launched S&P Green Bond Select Index forms the basis for one of the world's first green bond exchange-traded funds (ETFs). Although all types of investment products (actively managed and index based) are important in the continued development of the green bond market, the recent launch of ETFs will likely play an important role in its evolution.

This paper assesses opportunities and remaining challenges for green bonds as green finance investment instruments.


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