{"id":33503,"date":"2021-10-25T20:35:11","date_gmt":"2021-10-26T00:35:11","guid":{"rendered":"https:\/\/test.greenmoney.com\/2025\/?p=33503"},"modified":"2021-11-20T15:29:37","modified_gmt":"2021-11-20T20:29:37","slug":"green-bond-standards-advance-bringing-greater-clarity-for-issuers-investors","status":"publish","type":"post","link":"https:\/\/test.greenmoney.com\/2025\/green-bond-standards-advance-bringing-greater-clarity-for-issuers-investors\/","title":{"rendered":"Green Bond Standards Advance, Bringing Greater Clarity for Issuers, Investors"},"content":{"rendered":"
>> Back to November 2021 Issue<\/a><\/div>\n

\"HenryThe green bond market, which is anticipated by Climate Bonds Initiative (CBI) to reach $1 trillion annually by 2023, has played an increasingly important role in financing assets needed for the transition to a low-carbon future. In 2021 labelled green bond issuance as a percentage of the total has grown to 20% in Europe and 3% in the US, with green bonds making up approximately half of all labelled bonds ($356.2 billion in YTD issuance) and instruments with other green elements (sustainability and sustainability-linked bonds) comprising more than half of the remainder.1<\/sup> Issuers from 47 different countries executed a green debt deal in the first half of 2021 alone.2<\/sup><\/p>\n

The collective focus on green project categories that address climate change mitigation-related issues (such as energy, buildings and transport) has remained strong despite the expansion of the market \u2014 likely due to increasing adoption of climate targets at national and organizational levels (Exhibit 1).<\/p>\n

\"Exhibit<\/p>\n

This growth, however, has outpaced the development of precise global standards and guidance as to which bonds qualify as \u201cgreen.\u201d This creates present-day hurdles for issuers and investors, placing further market growth at risk to the extent that trust in the \u201cgreen bond\u201d label could falter in the context of growing scrutiny over investment funds\u2019 possible greenwashing. Many standard-setting bodies have recently sought to address this issue.<\/p>\n

Standardization Aims to Increase Confidence, Credibility<\/h2>\n

While use of bonds proceeds fairly quickly coalesced around the guidelines laid out in the International Capital Market Association\u2019s (ICMA\u2019s) Green Bond Principles,3<\/sup> certain corners of green finance continue to grapple with uncertainty. Some issuers remain doubtful as to whether their projects have sufficient impact to qualify in the green financing market. Others fear their perception among ESG investors as a non-green entity may disqualify them from participation.<\/p>\n

Some notable guidance has emerged since the beginning of 2020. One key area is \u201ctransition\u201d finance, where companies in higher-carbon-emitting industries and businesses look to pursue a greener path. In September 2020, CBI and Credit Suisse published \u201cFinancing Credible Transitions,\u201d a framework that defined specific principles for an ambitious climate transition strategy and proposed a set of labels for economic activities along the spectrum from net-zero aligned to stranded to bring clarity to potential entrants to the transition bond market. In December 2020, ICMA released its \u201cClimate Transition Finance Handbook\u201d, which delivered issuer-level recommendations on the disclosure necessary to generate trust from investors regarding transitions, even if it did not provide a definitive framework for defining transition bonds as some had hoped. Broader frameworks like the Transition Pathway Initiative and IEA Net Zero by 2050 Roadmap help to define the credibility of issuer transition strategies and trajectories to date. CBI contributed further to this effort in September 2021 with the publication of a discussion paper on transition finance for transforming companies. This document proposed \u201challmarks of a credibly transitioning company\u201d \u2014 adoption of Paris-aligned targets, and evidence of robust plans and governance, implementation action, internal monitoring, and transparent reporting \u2014 to encourage the disclosure of material and decision-useful information by issuers, and to assist investors in their evaluation of the adequacy of an issuer\u2019s transition.<\/p>\n

Investor concerns generally center on whether they have adequate information to make well-informed decisions. Greater formalization of transition benchmarking and green bond qualifications is expected to provide \u201cconfidence for investors, credibility for issuers and clarity for bankers.4<\/sup> This, in turn, could promote greater market growth in high-emitting areas of the economy.<\/p>\n

EU Taxonomy Advances<\/h2>\n