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Capital Markets

CSR: Impact reporting colours green bonds

Leading green bond issuers are working together to find a solution to one of the problems holding back the growth of the market – how to report back to fund managers on the environmental impact of their investments. The determination to find a solution on both sides is clear. The path to finding that solution remains elusive.

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The developing green bond market has brought with it a new era in investor/issuer relations. Parties on both sides report a level of transparency and cooperation never experienced before. When it comes to impact reporting however, problems remain.

The VW emissions scandal blew a hole in hasapublic confidence in the way companies track their environmental efforts. This undoubtedly had knock-on effects on the green bond market. At the December COP21 climate change meetings in Paris, investors repeatedly referred to VW’s behaviour as an example of how hard it can be to trust the information they receive on use of proceeds for green finance.

The Paris Green Bonds Statement, backed by 27 global investors, representing over $10 trillion of total assets under management, made their expectations of issuers very clear:

“We encourage issuers to ensure transparency around the use of proceeds and their impact, and for corporate issuers to have credible independent reviews of the environmental credentials of climate bonds and green bonds and confirmation of the assets’ use of proceeds and resulting climate benefits,” the statement said.

It is clear the lack of reporting standards is a big problem for investors when it comes to relaying the outcomes of projects supported by green bonds.

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