Guest Post: A Differentiated Green Investment Opportunity
By: Arnaud Heckenroth, Head of Equities Structuring EMEA, Barclays
In 2015, most countries signed the Paris Agreement to limit global warming to less than two degrees Celsius (2°C) above pre-industrial levels, recognizing that this would reduce the risks and impacts of climate change.
Under the Paris Agreement, each country must determine, plan, and regularly report on the contribution that it undertakes to mitigate global warming. The countries have submitted plans to reduce carbon emissions in so-called intended nationally determined contributions (INDCs) by 2050.
Scientists see the two-degree Celsius threshold as the point where irreversible climate damage and consequential extreme weather effects will occur. Without further action, by 2100 the world will be warmer than at any other time in human history and if we don’t act now, the result could be unprecedented and widespread environmental, societal and economic disruption. 1
Most climatologists believe that we are currently on course for a global warming of 3-4°C which is well above the 2°C target of the Paris Agreement 2
Global sustainability challenges, such as flood risk and sea level rise, extreme weather, demographic shifts and regulatory pressures, are introducing new risk factors for investors.
As client demand for sustainable investment opportunities continues to grow, Barclays has launched its inaugural Green Structured Notes Programme, which offers institutional and retail investors a differentiated green investment opportunity.
The Barclays Green Structured Notes Programme
The Barclays Green Structured Notes Programme is a green investment opportunity where both the net use of proceeds and the embedded equity derivative are green in nature, leveraging Barclays existing Green Bond issuance capability and experience in equity derivatives.
100% of the net proceeds (converted into GBP on issuance) will be used in financing and refinancing of green assets.
The programme offers investors a differentiated green investment opportunity, with payoff linked to a green index (selected in line with the Barclays Green Index Principles) and the proceeds will be used in line with Barclays Green Issuance Framework and Climate Bonds Initiative (CBI) sector criteria to finance or refinance a portfolio of Eligible Assets.
Climate change investing
The first index available for use in Green Structured Notes is the Solactive Climate Change Europe BTI Index3.
Launched earlier this year, Barclays and Solactive partnered to launch the Solactive Climate Change Europe BTI Index.
The Solactive Climate Change Europe BTI index is designed to meet the needs of investors seeking to reduce their exposure to physical risks and transition risks and who wish to pursue opportunities arising from the transition to a lower-carbon economy.
Using ‘right.based on science’s’ unique scientific data, the index tracks and invests in European companies which are aligned with a 2°C global warming scenario through to 2050 and maximizes investor exposure to companies with emission reduction targets.
Returns of the new index are available to clients through products exclusively offered by Barclays and has been designed to meet the needs of investors looking to explore investment opportunities arising from the global move to a lower-carbon economy.
Climate-aware investment strategies have never been so important and Barclays is proud to have worked with Solactive to provide this efficient investment solution, uniquely aligned with the objective of the Paris Agreement to keep the increase in global average temperature to below 2°C above pre-industrial levels.
Barclays has a key focus on the impact of our financing and continues to grow its product offering and social and environmental financing activity across the bank. Today’s announcement follows the launch of the Barclays Solactive Climate Change Europe BTI index and Barclays’ intention to support climate-related products and initiatives through Green Bonds issuance. To learn more about how Barclay is supporting a sustainable and inclusive economy, click here.
To learn more about the Green Structured Notes programme, click here
About the author:
Arnaud Heckenroth is a Managing Director and Head of Equities Structuring EMEA at Barclays, based in London.
Arnaud is responsible for driving the delivery of structured products, derivatives solutions and quantitative investment strategies in the region in partnership with sales and trading. He is also responsible for coordinating product innovation for wealth managers and distribution channels, and the development of investment and hedging solutions to institutional clients.
Prior to being appointed to his current role in February 2021, Arnaud was Global Head of Equity Exotics and Hybrids Structuring, a role he assumed in early 2019. Prior to joining Barclays in 2013, Arnaud was Head of the Equity Exotics Stucturing team for EMEA at Nomura in London. Arnaud started his career in 2004 in the Equity Structuring team at Lehman Brothers in London.
Arnaud holds an MSc in Engineering (Diplome d’Ingenieur) from the French Grande Ecole Telecom ParisTech and an MSc in Probability & Finance from Sorbonne University in Paris.
1 Source: IPCC, 2018 Global Warming of 1.5 ºC https://www.ipcc.ch/sr15/ Chapter 1, page 56
2 Source: https://www.unenvironment.org/resources/emissions-gap-report-2019 (page 13)
3 The Solactive CC Europe BTI index is available in 4 return types, for the Green SN programme please refer to the Price Return (PR) version
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