The ongoing initiative to improve the consistency of

Info icon This preview shows pages 5–7. Sign up to view the full content.

View Full Document Right Arrow Icon
investor base. The ongoing initiative to improve the consistency of definitions and methodologies for determining the eligibility of green projects across the jurisdictions of China and the European Union represents perhaps the most significant effort to address this issue (European Investment Bank (2017)). Climate Bond Certification As discussed above, the CBI maintains a list and database of green bonds issued since 2009. The bonds in its database have green labels, but inclusion in the database does not constitute an opinion by CBI as to the correctness of the label. The CBI also provides standards and a certification procedure. While the Green Bond Principles are very general, the CBI’s Climate Bonds Standard establishes sector- specific eligibility criteria to judge an asset’s low carbon value and suitability for issuance as a green bond. Assets that meet the CBI standard are then eligible for Climate Bond Certification, after an approved external verification that the bond meets environmental standards and that the issuer has the proper controls and processes in place. A limitation of the CBI standard is that it does not necessarily mandate monitoring and verification on an ongoing basis (Table 1, first column). It is highly useful for investors to have an entity regularly renew its certification, particularly if they intend to maintain the investment over a multi-year horizon. Green bond indices Green bond indices identify specific bonds as green via a stated methodology, and allow investors to invest in a portfolio of green bonds to diversify risks (Table 1, second column). To this extent, the green bond index providers also effectively act as institutions of certification. At present, global green bond indices are compiled by Bank of America Merrill Lynch, Barclays MSCI, Standard & Poor’s and Solactive. 6 Each 6 In addition, there are several internationally listed green bond indices focusing on specific jurisdictions – in particular China. For instance, the Shanghai Green Bond Index Series (developed by Characteristics of different green bond identification and certification schemes Table 1 CBI Climate Bonds Certification Green bond indices 1 CICERO Second Opinions Moody’s Green Bond Assessments Standard & Poor’s Green Evaluations Use of funds must be tied to green investment Yes Yes Yes Yes Yes Eligibility criteria differ by sector Yes Yes Yes Ex post monitoring/assessment Yes Granular assessments of greenness Yes Yes Yes Quantitative weights for specific factors Yes Yes 1 Bank of America Merrill Lynch, Barclays MSCI, Standard & Poor’s and Solactive.
Image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
94 BIS Quarterly Review, September 2017 has its own methodology for choosing the components of the index. While advertising consistency with the Green Bond Principles, each index also specifies additional factors such as size and liquidity, as well as the specific industry sectors for which the proceeds are used.
Image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern