Investors who aim to create net-zero portfolios encounter significant obstacles in the global sovereign bond market, which has a value of $64 trillion. This market is often not aligned with sustainability goals.

Unlike the corporate bond market, which has over 70,000 issuers, the sovereign bond market has fewer than 150 issuers. This limited number of options leads to concentrated portfolios that may include bonds from countries that are not proactive in addressing climate change. Moreover, many institutional investors are obligated to hold government debt to match their assets with liabilities. As a result, they are compelled to purchase bonds that do not meet their sustainability criteria.

This situation highlights the challenges faced by green investors as they navigate the sovereign debt landscape while striving to implement environmentally responsible investment strategies.