• No specific market definitions of ‘Green bonds’ or regulatory reporting
  • Issuer(s) can define what they think constitute the notion of GB…
  • Environmental stewardship is a differentiating factor
  • There does exists:
  • The Green bond principles (by the international capital market associations, 2014, updated 2018)
  • It faciliatates guidance and transparency of the market
  • Focuses on the ‘usuage of proceeds’, project evaluation and selection process and reporting management process
  • The Green Evaluation Analytical Approach (2017, April, Standards & Poor (S&P)–a point-in-time assessment of the relative environmental impact of financing transaction or portfolio.
  • There are now green loans and green CLO—collateratised loan obligations
  • fixed income debt instruments like any other bond. ‘Offer a stated return, and a promise to use the proceeds to finance or refinance, in part or fully, new or existing sustainable projects.’
  • Green bonds fund environmental, social and governance improve- ment or projects:

renewable energy and energy efficiency projects, clean   public transportation, pollution prevention and control,   conservation, sustainable water and wastewater   management, and green buildings that meet   internationally recognized standards and certifications

Related  concepts

  • ESG (2006 UN Principles for Responsible Investment) Initiative (PRI—6 core principles to encourage investors to integrated environmental, social and governance into investment decision making and ownership practices)
  • UN SDGs, 2015. ‘bolstered the importance of ESG investing by providing a global framework for financing sustainable development’ (p.45 S &P Global) also supported private sectors involvement to address funding gap.
  • Green, Social and Sustainability Bonds  market offer ways to capitalise on ESG trend and can add value to portfolio

ØOffshoots of GB: forest bond, water bond

  • Outstanding issues: comparability of data, reporting formats and contents, frameworks and impact reporting.
  • Controversies: environmental and climate integrity of projects

Evolution of green Bonds…

Now around almost 20 years:

  • Issued as a way for projects to raise finance with the goal of cut/reduce emissions… using green project finance covering…
  • Renewable Energy/Energy Efficiency/Low-carbon/ water efficiency

First  issued by European Investment Bank (EIB), 2007 (Climate  Awareness bonds, July 4 Euro 600 million)

World Bank 2008  (December)

Total yearly issuance $1 billion, 2007-2009.

Other early actors:  EBRD, IFC, AB, AfDB, and  a few Norwegian finance institutions  since 2010

2014:  Green Bond Principles (Jan 2014—4 banks—best practices in GB  markets focusing on  disclosure and transparency) – led to GB took off: total issuance $36 billion with addition of non-MLI: Bank, corporates, and local governments non

Note:  Multilateral lending Institutions (MLI) aka ‘supranational institutions’ role continue in terms of off shoot development; but only  a few dominate  the GB sectors and their share is  declining (now about  5% or $8.6 billion  (of 167 million, 2017) with EIB is the largest  issuer of MLI’ GB  (S&P 2019).

Mariama Williams ,South Centre.

Download full presentation here