Adding a responsible dimension to your sovereign bond allocation


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The potential of sovereign green bonds

Responsible investing in the government debt space is a need that more and more investors share. Nations can be, however, complex to assess from a sustainability perspective, making the attribution of ESG ratings exposed, sometimes, to subjective assessments of social and political orientations, that change over time. This renders the traditional ESG approach based on filters or exclusions not viable for the ESGisation of a government bond portfolio.

Fortunately, a more objective approach to responsible investing in the government bond space exists, in the form of the government green bond market. This forms part of the broader and rapidly growing green bond market which is now worth well over EUR 2 trillion1 and which, especially in Europe, offers an increasing degree of diversification.

Green bonds are debt securities where the proceeds are used to finance climate or environmental projects. By construction then, green bonds are highly transparent instruments that tie the use of capital to projects with a tangible and measurable positive impact in environmental terms.

Investing in European government green bonds, for example, provides investors with surety that they are positively contributing to the achievement of the EU 2018 Action plan on sustainable finance, that aims to help the EU achieve the net zero transition. 

As exemplified by our own product development (or “ETF launches”), the growth of the government green bond market over recent years has been accompanied by innovation.

For the most fervently committed to climate action

The Lyxor Euro Government Green Bond (DR) UCITS ETF, which debuted in 2021, is designed to cater for clients seeking to combine government bond exposure with a strong commitment to climate action. Being 100% invested in green bonds issued by Eurozone governments, it has a natural geographical bias towards the largest Eurozone sovereign green bond issuers, France, Germany and Italy. And given that green bonds typically have a longer maturity than non-green bonds, it exhibits a higher duration, or level of interest rate risk2, compared to standard euro government bond indices. This makes it more suitable for investors who do not have tighter constraints around geographical or duration exposures. 

Adding a responsible dimension to a traditional government bond exposure

For investors seeking innovative solutions that fuse sovereign bond investments with an ESG stance while maintaining the same risk profile, including duration and country allocation, as a standard Euro Government Bonds exposure, Amundi recently launched, in June 2023, a green bond tilted euro government bonds ETF – theAmundi Euro Government Tilted Green Bond UCITS ETF. This SFDR Article 83 ETF is designed to limit country and duration bias, while at the same time offering a 30% exposure to green bonds. It thereby provides an efficient means of adding a responsible investing dimension to a core government bond building block.

For more information about investing responsibly in the sovereign bond space please refer to our dedicated Fixed income page.



1. Source: European Commission: Sustainable Finance, March 2023
2. Source: Amundi ETF, December 2023
3. SFDR: “Sustainable Finance Disclosure Regulation” – 2019/2088/EU. EU regulation that requires, amongst other things, the classification of financial products according to their ESG intensity. A fund is referred to as “Article 8” if it promotes ESG characteristics in tandem with other financial objectives, or “Article 9” when it has a sustainable investment objective. Any fund that does not comply with the two previous categories is an “Article 6” fund.


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