Green bonds are intended for the financing of sustainability projects, many of which are in the built environment. Yet they are still relatively new to the market, having first been introduced in 2008 after a group of Swedish pension funds contacted the World Bank to ask how they could find investments that would help sustain the environment.
The IMF asks whether this fast-moving and creative market can ensure ‘risks and rates of return are fully transparent, comparable, and accessible in ways that can be consistently monetized’ against a background of change, varying national approaches to sustainability and, of course, intense competition.
The language of green bonds
Every bank active in international capital markets now has staff dedicated to green bonds. Verification and other information services are growing around this market to help supply confidence, but risks and issues still remain – a key problem being whether all the parties concerned are talking the same language around green finance.
Standardisation was a major talking point during the recent WBEF webinar ‘De-risking green finance’, which brought together four experts to discuss the current and future state of the market.
“There are a cacophony of groups, industry associations and regulators trying to establish a common language for the sustainability project”, notes Michael Doran, Partner at law firm Baker McKenzie. With fellow panellists, he discussed the value of the EU taxonomy for sustainable finance (‘a list of economic activities with performance criteria for their contribution to six environmental objectives to create a common language for all actors in the financial system’), in helping to increase confidence that projects funded really are green. RICS played a major role in developing the taxonomy as one of the 35 expert bodies chosen to sit on the working group, sharing its broad experience in the built environment and sustainability.