The new climate for central banksWe now think a separate green bond purchase programme is unlikely. Instead, wethink the ECB is more likely to reduce carbon intensity across all of the corporatebonds it holds, whether held as part of asset purchases or as collateral. We think itmight do this by tilting its definition of market neutrality, away from higher carbonintensity issuers towards lower carbon intensity issuers for corporate bonds, but notsovereign bonds. The ECB’s strategy review will report in the second half of this yearbut in the meantime, the Bank of England may announce measures first.How diversified are green bond investors?

Green bond issuance year to date is more than double the same period last year,while social bond issuance is almost triple. So the market is growing strongly. Butlooking at the distribution of green bonds across EUR, GBP and USD, and across IGand HY, we find that the market is still very concentrated, in particular in Utilities andBanks, even though issuance in the past 12m has been less skewed to Utilities. Butsectors with negative greeniums – in particular Autos, but also more generally GBPand USD – suggest there is investor appetite to diversify. Meanwhile, growth ofsustainability-linked bonds has been slow.