The green, social and sustainability (GSS) bond market has been growing rapidly, and such bonds offer defined contribution (DC) investors transparency and alignment with environmental, social and corporate governance (ESG) goals. Fixed income has undergone a remarkable repricing, and the period of extraordinarily low interest rates appears to be over.

Therefore, fixed income could once again offer income and diversification potential. The aggregate GSS market out-yields the broader global aggregate market – which means the “greenium” associated with use-of-proceeds bonds need not be a significant concern. Active management is crucial within this market; labelled bonds carry a heightened risk of greenwashing and investors should consider each bond’s sustainable issuance framework as well as the issuer’s creditworthiness.

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