The City of London Is Late to a Bond Market Party

The U.K. government is finally adding green to the shades of gilts available to fixed-income investors. It’s unfashionably late to a party that’s been in full swing for several years. And its tardiness means a missed opportunity for the City of London to dominate an area of finance that will only increase in importance.

Sales of green bonds — debt whose proceeds are used to finance environmentally friendly projects — have soared in recent years. Asset management firms are under increasing pressure from customers to demonstrate that their capital isn’t being allocated to activities that damage the planet, so there’s a ready source of demand. Pacific Investment Management Co., for example, launched a bond fund last month that it said was dedicated to finding “the likely winners of the transition to a net zero carbon economy.”