The sustainable asset manager Triodos Investment Management will not invest in the first £15bn (€17.6bn) UK green Gilt that will be issued next week.
The green gilt does not meet the firm’s strict criteria for green bond eligibility because it will finance investments in blue hydrogen and carbon capture and storage (CCS), according to William de Vries, head of impact equities and bonds at the firm.
“After a thorough analysis of the upcoming UK green sovereign bonds, Triodos Investment Management has decided not to invest in the green Gilt,” De Vries wrote to IPE.
“Blue hydrogen does not comply with our strict minimum standards on fossil fuels,” he added. “The issue with blue hydrogen is that it uses natural gas as input and emits CO2, which is captured. Hence, it is a technology that burns fossil fuels. The only aspect that makes it zero carbon emitting is that emissions are captured by CCS.”
De Vries added he would prefer the proceeds were used to invest in green hydrogen, using energy generated by wind turbines or solar panels.
“An often-used argument in favour of blue hydrogen is that it is cheaper than green hydrogen, however, even if this is the case, it locks the economy into the use of fossil fuels instead of truly shifting to more sustainable solutions,” said De Vries.
Lack of detail
De Vries also criticised the lack of detail on the CCS projects that will be financed.
“It cannot be excluded that the CCS financed through the green bond will be used for sectors that could very well decarbonise through other technological developments. Hence, it cannot be excluded at this time that the CCS provides a lock-in to fossil fuel use, where viable alternatives exist. Thus again, hindering the shift towards truly sustainable solutions,” he said.
De Vries added Triodos engaged with the issuer on the topic but to no avail.
The UK is late to join the green bond party. In the past few years, countries such as Germany, France, Italy, Belgium and the Netherlands already issued green bonds. €4.5bn Triodos IM invests in a number of these issues.
De Vries confirmed the UK green gilt is the first ever government-issued green bond that his firm considers not green enough to be investable.
He said: “We have had doubts and questions with other green bond frameworks, for instance the Belgium one, but after consulting with them we decided to proceed with caution.”