Organisations driving forward the burgeoning green market should ignore claims that more onerous reporting standards and other initiatives may prove too high a barrier to entry for emerging market or small corporations to enter, according to Arunma Oteh, treasurer of the World Bank.
“If we’re going to tackle the climate change pressure that we face in the world, we have no choice,” she told GlobalMarkets. “I think the world realises it. My experience of talking to some issuers is that they’re very excited that there are standards that can help people better understand what they’re doing in this market.
“I don’t think we need to reduce the standards so that others can enter this market. We’ve had some very successful issuances by other types of institutions, other than supranationals.”
Isabelle Laurent, deputy treasurer and head of funding at the European Bank for Reconstruction and Development, believes that those organisations involved in crafting the Green Bond Principles — a set of guidelines on issuing green bonds — must be wary of ensuring that the market is just as attractive for small corporations or poor countries as it is for supranationals with vast resources, for whom sustainability is built into their very being.
“Quantitative reporting can be very different for many issuers, so the Green Bond Principles have to be minded to strike the right balance between ensuring the integrity of the green bond market and that money goes to projects that are going to have significant impact, but reporting should not be too complex and costly that many issuers will be deterred,” Laurent told GlobalMarkets.
“We have a large team of environmental specialists, because sustainability is part of who we are and we’re required to assess it for every project. So that’s a very different dynamic.”
On development participants are united against a regulatory aspect on governing what is green, however.
“Regulation is an awkward one because people’s views on green are different and change over time,” said a head of funding at a major international institution, who did not want to be named. “For instance, at one time biofuels were seen to be the future, but now people are not so sure.”
GREEN GOVERNMENT
So far, no governments have sold green bonds. But France has confirmed it will issue one in 2017 and, in the emerging markets, Nigeria has also looked into the possibility.
By tapping the green bond market, such countries may be able to find demand from investors that would not normally take part in their bond issues.
Spanish development bank Instituto de Crédito Oficial has sold two social bonds — a similar product to a green bond, except with a social rather than environmental focuse.
Even among investors without a specific focus on environmental or social securities, the green bond product is starting to raise interest.
“I’ve been to various investor meetings in the US east coast over the last few days and it’s interesting how often they have brought up the topic of green bonds and want to understand them,” said EBRD’s Laurent. “These are not strictly speaking green investors, but it appears to be part of their focus.”