This post is part of an EDF+Business ongoing series on sustainable finance, highlighting market mechanisms and strategies that drive environmental performance by engaging private capital. EDF is actively engaging leaders with the capital and expertise needed to catalyze sector-wide changes—from accelerating investment in energy efficiency and clean energy, to protecting tropical forests, restoring depleted fisheries and saving habitats of endangered species.
Green bonds have been hailed as a key vehicle for driving clean energy investments both before and after the signing of the Paris climate agreement. And the range of organizations utilizing them continues to diversify – Apple issued its own $1.5 billion bond last month to finance energy efficiency and renewable energy projects for its operations. But as the pool of bonds issued each year grows, investors are increasingly concerned that clear standards are needed.
Through 2013, the World Bank was the primary issuer of green bonds. The simplicity of the market made it easier to verify the environmental benefits. As the market has grown, so has the need for institutionalizing transparency to validate the promised benefits.
While roughly two-thirds of global green bonds issued in 2015 received either third-party verification or second-party opinion, only two U.S. municipal offerings received any external review, casting doubts on the U.S. market’s credibility. Investors like insurance firm Allianz are concerned that many of the funds earmarked for sustainable development projects are not achieving the desired impact, and are calling for strong standards to help provide the market with increased certainty.
Bankers and investors are driving progress on transparency Read more