Call for transition bonds to ease shift away from fossil fuels

AXA Investment Managers said the green bond market should include what it calls “transition” bonds, which would allow carbon-intensive companies to raise funds while moving away from fossil fuels.

Green bonds are classed as fixed income investments where the capital invested is devoted to activities with a positive benefit when assessed on ESG criteria. At present, there is strong demand for green bonds, but AXA IM said that many companies looking to move away from fossil fuel are unable to issue completely green bonds.

AXA IM head of ESG research and engagement, Yo Takatsuki, commented: “Aimed at companies operating in greenhouse gas intensive industries such as material, extractives, or chemicals, alongside other companies which lack sufficiently green assets to issue a green bond, transition bonds would provide an alternative source of finance specifically aimed at helping the journey to become greener.”