Investors striving for sustainable investments has caused a surge in interest in green bonds, according to Franklin Templeton's head of European fixed income, David Zahn.
The team has around £7bn under management and Zahn said he is committed to green bonds, even in conventional strategies which he said have a 20 per cent allocation to green bonds.
Five years ago the firm launched the Sustainable Euro Green Bond UCITS ETF, now worth €321.5mn (£270.1mn).
This is a trend that has been "steadily increasing" in recent years, said Zahn.
He said: "There is a lot more focus on green bonds for three reasons. One is within Europe more and more investors want sustainable investments that they can show are sustainable and are being used for proceeds that are clearly sustainable.
"Number two is that duration is relatively long. So the Euro Green Bond aggregate is about a year longer in duration than a conventional green bond aggregate. So given rates have gone up so much, it makes sense to add duration.
"The last one is just there's more people who want to have an impact and demonstrate that they're doing something with their money to help."
Zahn said currently the green bond universe is worth more than £800bn, and looking forward, he expects interest in the area to grow.
He said more green bond issuers are coming forward, with the demand to meet it, meaning it is becoming more diversified.
"There's a lot of people that haven't really looked at [green bonds] very much," said Zahn.
"It is very high quality and so I think there will be this ongoing demand of people wanting green bonds, which should be supportive for them, but also the rate structure is also supportive for it."
tara.o'connor@ft.com
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