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Investors calls for transparency and clarification in green bond market



A group of investors are calling for further transparency, standardisation and clarification in the green bond market in order to spur growth and help the sector reach its potential.

Green bonds have seen impressive growth in recent years as investors seek to have a positive impact whilst making a financial return. Green bonds work in the same way as traditional bonds but are used to fund environmentally friendly projects, from renewable energy to restoring the natural environment.

A coalition of investors, convened by Ceres’ Investor Network on Climate Risk (INCR), has now released a statement of investor expectations to support a framework for the green bond market. The investor group is made up of substantial purchasers of green bonds, including pension funds, insurance companies and asset management firms. The coalition is seeking to build on the Green Bond Principles, which aims to encourage disclosure and transparency within the market.

The statement of expectations argues that further definition and structure in four key areas would benefit the market, including a general criteria for ‘green’ projects. Additionally the investors want to see a disclosure in the bond offering statement that includes intended use of proceeds, reports on use of proceeds and project impacts and benefits, and independent assurance.

Chris Davis, director of investor programs at Ceres, said, “Green bonds are a critical financing mechanism for the clean energy solutions we urgently need, and the growth and integrity of the market will be supported through clearer standards that provide further guidance to issuers.”

A Ceres report published last year identified green bonds as a key driver for a low-carbon economy, as the financial instrument will help accelerate private capital flows into clean energy.

“Strong standards and clear disclosure will be crucial for the further development of the green bond market, and we welcome INCR’s initiative to provide investors with a dedicated platform to voice their expectations,” commented Cecilia Reyes, chief investment officers at Zurich Insurance Group.

Last year the green bond market saw incredible growth, reaching $36.6 billion (£24bn), more than triple the figure recorded in 2013, according to the Climate Bonds Initiative.

Photo: lamoix via Flickr

Further reading:

Green bond issuance triples in 2014

Campaigners call for clarity in Green Bond Principles

Investors commit to expanding the climate bond market

Green bond market predicted to grow to $100bn in 2015

World Bank: green bonds changing investor expectations