Nikko to launch green bond fund in Japan

London, 28 January: Nikko Asset Management (Nikko AM) has developed a fund for the Japanese retail market that will invest mainly in ‘green’ bonds issued by the World Bank.

The World Bank’s green bonds finance projects in areas such as renewable energy, new technologies that reduce greenhouse gases, and reforestation. The World Bank has sold around $960 million of green bonds since November 2008 and other development banks, such as the European Investment Bank, have issued similar bonds.

“This [fund] will give investors an opportunity to help the world,” said Timothy McCarthy, Nikko AM’s chairman and CEO.

Sumitomo Mitsui Banking Corporation (SMBC) and Nikko Cordial Securities are accepting applications to invest in the fund from 1 February in preparation for an anticipated launch on 19 February. The SMBC Nikko World Bank Bond Fund is structured as an open-ended investment trust and is targeting a yield of 7-8% per year by investing in green bonds in about 20 different currencies. Nikko did not disclose the anticipated size of the fund.

Japanese retail investment products are often denominated in non-Yen currencies, as they tend to bring higher yields. Nikko said the World Bank’s International Bank for Reconstruction and Development will issue the bonds for the fund in currencies chosen by Nikko.

Nikko is understood to be considering a second fund available to international institutional investors, for launch in the coming months.

Nikko AM previously worked with the World Bank to create the World Supporter Fund, an open-ended trust for the Japanese market that invested in World Bank bonds denominated in emerging currencies.

Earlier this month, Daiwa Securities began marketing some $110 million of World Bank green bonds to Japanese investors.