Green Bonds

Key takeaways

  1. Look at certified green bonds, be careful what falls outside green investments.

  2. You should not only report on green bonds as inputs but also tangibly assess their current output, outcome and impact - how have they made a difference already?

  3. For impact scale assessment purposes, describe the green bond within its bigger picture, i.e. how much is this investment compared to the overall portfolio.

What are they?

A bond is a debt instrument that is interchangeable; you can buy and sell it. Companies use bonds as a way to access finances.

Green bonds are bonds that are only used to fund green projects, which have a positive impact on the environment. They have been around for over a decade, but they only started to be actively used in 2014. In 2020, green bonds issuance hit a record $269 billion (this makes around 1/5th of the annual budget to tackle climate change); they grow by 30% every year. Green bonds are one of the instruments with the highest impact reporting attached. It is part of the Green Bond Principles to release a yearly progress report.

Find out more on the Climate Bonds Initiative website.

SDG choice

The SDG depends on the type of impact the investments have. It could be on:

✅ SDG 7

✅ SDG 11

✅ SDG 13

And more

Impact assessment

There are different types of players involved in green bonds: issuers and underwriters.

  • An underwriter is often a bank who designs and distributes the instrument.

  • An issuer is a company using the money to create the green project.

In your impact analysis, you need to look at the issuer and the green bond and see if it is labelled as a green bond (officially).

One green bond can finance several projects. Therefore, in your analysis, look at what it is financing. What is inside and outside the scope of a green bond? i.e. remodelling insulation in buildings, R&D on energy storage, etc. Remember, a green bond is an input, so in your analysis, it is important to describe the outcome and impact of the projects financed by the green bonds and avoid discussing any future impacts.

Companies will often report their green bonds’ impact, as required by the Green Bond Principles. Therefore, make sure to look at the company’s annual report for this information. However, make sure to go beyond the company’s report by using outside sources to confirm or challenge the impact.

Also, take into account the following points:

1/ The breadth of the impact

  • Is the impact local, national, or global?

  • How many people are concerned? Thousands? Millions? Billions?

2/ The depth of the impact

  • Is society/the environment concerned deeply affected, or are they just marginally impacted by the impact of the green bond?

  • Are the changes brought by it profoundly changing society or the planet?

3/ The persistence of the impact

  • How long would the impact described last for? Months? Years? Decades?

  • How reversible is the impact described in the impact analysis? Can it be easily stopped/extended?

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