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Best impact reporting - KfW, IFC and EIB

Channels: Green Bonds

Companies: KfW, IFC, EIB

People: Esohe Denise Odaro, Jürgen Köstner, Aldo Romani

When it comes to impact reporting, the judges could not choose between three leading organisations – the International Finance Corporation (IFC), the European Investment Bank (EIB) and Kreditanstalt für Wiederaufbau (KfW).

All three organisations were involved in the Harmonised Framework for Impact Reporting, which won Initiative of the Year in last year’s Green Bond Awards, and provided templates for reporting on projects, allowing best practice to be shared across impact reporting regimes.

Until then, impact reporting was inconsistent, with many different metrics, making it difficult for investors and users of the data to compare impact across green bonds.

Of the consortium of 11 MDBs that took part in the harmonisation initiative, the judges in this year’s Green Bond Awards felt IFC, KfW and EIB boasted equally good reporting regimes in 2016.

“The [harmonisation] framework’s objective of increased transparency is being achieved, as detailed reporting becomes the status quo in the green bond market,” says Esohe Denise Odaro, head of investor relations at the IFC. “Correspondingly, issuers now benefit from having a more focused process, with set metrics to track and publish as opposed to improvised and impromptu procedures.”

Impact reporting at the IFC focuses on four easy-to-understand metrics, she added.

  1. Annual energy savings.
  2. Annual greenhouse gas (GHG) emissions reduced or avoided.
  3. Annual renewable energy produced.
  4. Capacity of renewable energy plant(s) constructed or rehabilitated.

“This year, we have produced a more holistic report with an overview of the green bond programme’s endeavours and achievements throughout the fiscal year,” says Odaro. “In addition, the project list table now includes the link to the website bearing more relevant project information such as project sponsor details, environmental and social risks and mitigation, and other expected development impact. This report has received remarkably positive feedback from our investors.”

KfW’s impact reporting also focuses on simple metrics, says Jürgen Köstner, head of investor relations at KfW.

“We look for environmental metrics – GHG reduction, installed electric power and power delivered – and social metrics, such as employment, with preference given to environmental metrics,” he explains.

"The [harmonisation] framework's objective of increased transparency is being achieved, as detailed reporting becomes the status quo in the green bond market"
Esohe Denise Odaro, IFC

However, what sets KfW’s reporting apart is the fact that the MDB has secured the services of an external reviewer, to audit the impact of its green bonds, says Köstner.

“The key characteristic of our reporting in 2016 was the use of external reviewers,” he argues. “We are the only issuer that has mandated an external review that is completely independent, to look at the environmental impact of our green bonds.”

The external reviewer, Centre for Solar Energy and Hydrogen Research Baden- Württemberg (ZSW), evaluated the underlying projects of the green bonds to provide a detailed look at what the bonds are being used for and importantly what the impact per €1 million ($1.06 million) of investment.

EIB, on the other hand, provides 10 different impact indicators focused on renewable energy and energy efficiency projects.

These are: gross installed electricity capacity (measured in MW-e); additional electricity produced (GWh-e); primary energy savings (GWh-e); absolute GHG emissions (ktCO2e); relative GHG emissions (ktCO2e); gross installed heat capacity (MW-th); additional heat  produced (GWh-th); renewable energy capacity added; renewable energy capacity rehabilitated and additional length of transmission line (Km).

“EIB reports both absolute and relative GHG figures for its projects, at individual project and aggregate-level, across all sectors of its operations. We believe it is highly important to estimate and report both indicators,” says Aldo Romani, deputy head of funding, euro, at the EIB.

“This is because the relative figure gives a comparison with alternative scenarios and technologies, indicating the progress on emission reduction, and the absolute figure reports the actual GHG emissions that are going into the atmosphere and hence changing the climate.”

In this way the difference between absolute and relative reductions can be used to indicate the changing impact of EIB’s green bonds over time.

Click here to read about all the announced winners