A coalition of campaigners has called for further clarification in the Green Bond Principles, to ensure they include “genuine commitments rather than broad recommendations”.
A green bond’s proceeds are used to fund environmentally friendly projects, ranging from renewable energy to habitat restoration.
According to figures from the Climate Bonds Initiative, the market reached a record $10 billion (£6 billion) in 2013.
The Green Bond Principles were unveiled in January and signed by 13 investment banks, including Merrill Lynch, JP Morgan, Goldman Sachs and HSBC. The principles serve as voluntary guidelines on the recommended process for the development and insurance of green bonds. They aim to encourage transparency and disclosure within the market.
But NGO network BankTrack has published a letter – which is co-signed by Friends of the Earth US, the Rainforest Action Network, International Rivers, Global Witness and others – calling on the banks supporting the initiative to ensure high standards are upheld.
The letter says the principles need to be revised in order to tackle the issue of what can and cannot be considered ‘green’. BankTrack argues those using the principles should reference clear and science-based definitions and criteria to define which projects will aid the environment. An independent third party should then verify this it said.
In addition, the organisation called on the banks to curb fossil fuel financing to “avoid dangerous climate change”. A report published last year found that in the eight years to mid-2013 89 banks have funded coal project to the tune of €118 billion (£98 billion), the top two funders accounted for 71% of this.
Johan Frijns, director of BankTrack, commented, “Banks increasingly accept that climate change is a real and urgent problem, and initiatives like the Green Bond Principles do represent small steps in the right direction.
“However, they lack credibility when adopting banks continue to provide unabated support for fossil fuel extraction and coal power projects, which even development banks like the World Bank have said they will no longer touch.”
He added that the current method of allowing banks to decide what was ‘green’ does not “exactly inspire confidence” and that the implementation of the principles would need to be clearly monitored to see if banks meet the expectations they have established.
At the beginning of the year HSBC predicted that green bond insurance could more than double in 2014 to a global record of $25 billion (£15 billion). The analysts at the bank said, “The era of green bonds has arrived.”
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