Rome-Cooked Meal

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What's going on?

Italy added green bonds to its menu earlier this week, and returns-hungry investors put in a record number of orders for them.

What does this mean?

Sustainable investing is still very much on the up, and European countries are cashing in on the boom to bankroll their eco-friendly post-pandemic recoveries. Italys a case in point: it just sold bonds earmarked for environmental projects for the first time ever. The country sold $10 billion worth to investors, but it received ten times that amount in orders (tweet this). Thats not just twice the demand Germany saw in its own sale last year: its the most demand theres ever been for a governments green bonds, period.

Why should I care?

For markets:No one knows for sure if sustainability pays.


The huge demand even meant Italy could get away with paying less income on the bonds, which just goes to show that investors are willing to pay a premium or greenium for that sustainability label. And as more and more evidence shows sustainable funds generate better returns than their less socially responsible peers, skeptics might argue that this situation is a perfect example why: funds investments arent necessarily providing better returns because theyre green, but because theyre branded green.



The bigger picture: Its all part of a needs must bond strategy.


Of course, a sustainable bonds still a bond, and bonds have had their worst start to a year since 2013. Warren Buffett even warned his shareholders to steer clear of them in his annual letter. But some investors think pension funds and insurance companies have no choice but to dedicate a certain portion of their portfolio to bonds so as to guarantee their customers regular payouts. And since Italys are some of the highest-yielding in Europe (albeit some of the riskiest), they might be the best of a bad bunch.

Originally posted as part of the Finimize daily email.

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