Due to the low interest rates, more and more companies see an opportunity to finance their business investments by issuing a corporate bond. And more and more (institutional) investors see the opportunity here to realize a higher return with a limited risk. According to OECD, the value of the corporate bond market has doubled in 10 years.
A variant of a corporate bond is a “Green Bond”. A loan with the aim of financing sustainable investments within a company or government. These form of bonds is experiencing tremendous growth, as research by the Climate Bond initiative shows: an increase of 51% worldwide in 2019 compared to 2018, to over 250 billion dollars. The Netherlands is among the top 5 countries, behind to USA, China, Germany and France.
An example of a company with a Green Bond is Vodafone. Investments in the mobile network have a high financing requirement. A network that by definition has a “carbon reducing net effect” by enabling business customers to realize more sustainable business operations with Vodafone’s technology. Vodafone has issued a Green Bond of 750 million euros. The mobile telecom operator made a financing prospectus for this (not public), published a Green Bond Framework and recently published the first annual report with a financial account statement and the environmental impact of this form of financing.
Part of a Green Bond is having an ‘Expert Review’ carried out. The objective of such a review is to determine whether the investments actually have a green effect (use of proceeds), that the correct governance is in place (eligible green projects and management of proceeds) and that an annual (impact) report is issued.
Empact conducts such Expert Reviews using the Green Bond Principals 2018 and the EU Green Bond Standard 2020 when it is final (expected fall 2020). Reviews are used to provide potential investors with an independent opinion of the degree of “Green” in their loan or investment. A SDG assessment is often part of this. Empact goes one step further and provides management with advice on how to improve the ESG and SDG performance of their company in general and the Green Bond Eligible Green Projects in particular. This is important for the future of the organisation, important for the Green Bond Investor and important for real impact on the environment.
The success of Green Bonds shows that companies, governments and investors are willing to use financial resources to achieve sustainable results. And that deserves to be followed.
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