More and more companies are seeing an opportunity to finance their corporate investments by issuing a corporate bond because of low interest rates. And more and more (institutional) investors see the opportunity here to realize higher returns with limited risk. According to OECD, the value of the corporate bond market has doubled in 10 years.
A variation of a corporate bond is a “Green Bond. A loan aimed at financing sustainability investments within a company or government. This form of bond is experiencing tremendous growth as research by Climate Bond initiative shows: a 51% growth worldwide in 2019 compared to 2018, to $250 billion. The Netherlands is among the top 5 countries, alongside China, USA, Germany and France.
An example of a company with a Green Bond is Vodafone. Investment in the mobile network has a high financing requirement. A network that by definition has a “carbon reducing net effect,” by enabling customers to use Vodafone’s technology, to achieve a more sustainable business. Vodafone has issued a Green Bond of 750 million euros. The mobile telecom operator created a financing prospectus for this (not publicly available), published a Green Bond Framework and recently published the first ‘annual report‘ accounting for the spending and impact of this form of financing.
Part of a Green Bond is having an “Expert Review” conducted. The objective of such a review is to determine whether the investments actually have a green impact (use of proceeds), that the proper governance is in place (eligible green projects and management of proceeds) and that there is an annual (impact) reporting.
Empact conducts such Expert Reviews by using the 2018 Green Bond Principals and the 2020 EU Green Bond Standard when finalized (expected fall 2020). Reviews are used to give potential investors an independent assessment of the degree of ‘Green’ in their loan or investment. An SDG assessment is often part of this. Empact takes this a 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 matters for the future of the organization, matters for the Green Bond Investor and matters for real environmental impact.
The success of Green Bonds shows that both companies and investors are willing to commit financial resources to achieve sustainable results. And that deserves to be emulated.
#sustainablefinance #greenbond #EUtaxonomy #ESG #impactvaluation #SDGassessment #impactinvesting