The development of standardised definitions and

Info icon This preview shows pages 11–13. Sign up to view the full content.

View Full Document Right Arrow Icon
The development of standardised definitions and transparent procedures for assessing the greenness of bonds should help investors and businesses with aligned objectives find each other through the green label (as a “discovery tool”). Better securities and market design could lower the cost of linking investors to investments. Efficient instruments and markets do this at the lowest cost, which, in turn maximizes the flow of capital. All of the work that goes into defining what is to count as a green bond can be understood as important “spadework” in facilitating buyers and sellers to find each other. For instance, in 2015 the EIB established a direct link between its green bonds and the projects they finance. This improved level of information flow was achieved through better design and the upgrading of its internal procedures and IT-infrastructure following extensive due diligence. The linkage enables improved impact reporting and is also a strategic response to investor demand for funds that enable enhanced reporting on the carbon impact of their portfolios, in anticipation of regulatory requirements such as a French law (Article 173 of the Energy Transition Bill) that will oblige institutional investors to disclose this information (Bloomberg, 2015). 14 The World Bank Group, some municipal issuers (e.g. Massachusetts) and others also report details on a project-by-project basis.. TRANSPARENCY IN THE “USE OF PROCEEDS” AS A KEY TO INTEGRITY . 9 POLICY PERSPECTIVES
Image of page 11

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

View Full Document Right Arrow Icon
Governments have engaged in supporting the development of standards and definitions for green bonds. For instance, in 2015 Switzerland became the first national government member of the Climate Bond Partners to support the development of the Climate Bonds Standard (Kidney, 2015). China is developing country-specific Green Bond Guidelines and definitions to guide the market as part of broader green financial reforms (UNEP and PBoC, 2015) and the European Commission continues to monitor, assess and support these developments under the EU Capital Markets Union. (EC, 2015). Convergence towards commonly-accepted definitions and reporting procedures will be essential to maximise the effectiveness, efficiency and integrity of the market. Striking the right balance will be critical to avoid overloading issuers with administrative hurdles and transaction costs. Efforts aimed at harmonising and streamlining of definitions can serve to reduce these barriers and bureaucratic burdens. The Green Bond Principles (ICMA, 2015) describe a variety of ways for issuers to obtain outside input to the formulation of their green bond process and recommend several levels and types of independent assurance 15 . Such guidance and assure might include: Second party reviews and consultation: for example, an issuer can seek advice from consultants and/or institutions (“second party”) with recognised expertise in environmental sustainability to review or to help in the establishment of its process for project evaluation and selection including project categories eligible for green bond financing. The reviews and
Image of page 12
Image of page 13
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