Green Bond Standards Advance, Bringing Greater Clarity for Issuers and Investors

Nov 18, 2021 8:15 AM ET

by Henry Mason and Brian Ellis of Calvert Research and Management 

The green bond market, which is anticipated by Climate Bonds Initiative (CBI) to reach $1 trillion annually by 2023, has played an increasingly important role in financing assets needed for the transition to a low-carbon future. In 2021 labelled green bond issuance as a percentage of the total has grown to 20% in Europe and 3% in the US, with green bonds making up approximately half of all labelled bonds ($356.2 billion in YTD issuance) and instruments with other green elements (sustainability and sustainability-linked bonds) comprising more than half of the remainder. Issuers from 47 different countries executed a green debt deal in the first half of 2021 alone.

The collective focus on green project categories that address climate change mitigation-related issues (such as energy, buildings and transport) has remained strong despite the expansion of the market — likely due to increasing adoption of climate targets at national and organizational levels. 

This growth, however, has outpaced the development of precise global standards and guidance as to which bonds qualify as “green.” This creates present-day hurdles for issuers and investors, placing further market growth at risk to the extent that trust in the “green bond” label could falter in the context of growing scrutiny over investment funds’ possible greenwashing. Many standard-setting bodies have recently sought to address this issue. 

Learn more in this informative article by long-time leaders in ESG Investing here