Green fingers or green washing: sustainability research takes a look at green bonds

Channels: Green Bonds

Companies: oekom

The green bond market continues to grow at a phenomenal rate: the Climate Bonds Initiative has  forecast $100 billion of issuance for 2016. Such market growth has many benefits, but also disadvantages – making regulation and standards all the more important for ensuring the market's long-term credibility and efficacy.

A study published on green bonds in June 2016 (Green Bonds – Black Box With Green Label?) by independent sustainability initiative Südwind sees transparency and standards as the central lever for making green bonds a viable, long-term instrument for financing sustainable projects. Second party opinions (SPOs) are commonly regarded as an important accompaniment here. By providing investors with a meaningful summary and assessment of the sustainability quality of the green bond and the projects it funds, SPOs make it easier for investors to identify whether the bond in question matches their goals and investment strategies.

Awards and studies confirm the outstanding quality of oekom research's SPOs

oekom research's SPOs are characterised by a sophisticated and discerning sustainability approach which serves as the basis of the assessments, and is also commonly recognised and accredited by market experts:

  • In May 2016, half of the bond-specific categories of the Environmental Finance Green Bond Awards was won by bonds whose sustainability quality had been confirmed by oekom research SPOs.
  • The Südwind study of 32 SPOs published in June expressly singled out oekom research's second party opinions for their unrivalled quality and thoroughness, and for their depth of information which could allow them to serve as industry benchmarks.
  • oekom research was distinguished as the "most impressive Second Opinion Provider" at the GlobalCapital SRI / Green Bond Awards in September 2016. The award was the result of an extensive survey of market protagonists and experts which was conducted from June to August.

SPO and Green Bond Rating:

For some time now, corporate issuers and regional authorities have also been discovering the green bond market as a means of attracting sustainably inclined investors.

Sustainably inclined investors are, indeed, very keen to invest in green bonds, but many are often uncertain about whether a green bond truly is green. To be able to judge this, comprehensive techniques – such as those developed for oekom research's Sustainability Bond Rating – must be applied.

The Sustainability Bond Rating's objective is to evaluate the overall sustainability quality of a given bond. In doing so, it takes into account the results of the issuer's ESG rating and possible controversies, and also verifies whether the issuer respects the Green Bond Principles. Finally, it assesses the environ-mental and social benefits of each financed project category, as well as the selection criteria defined by the issuer to identify the financed projects. The constantly growing oekom Sustainability Bond Rating meanwhile covers almost $75 billion or around 50% of the global market registered in the Green Bonds Database.

With its sophisticated and high quality services, oekom research stands out as an innovation driver and industry leader for rating green bonds.

It ensures that green bonds remain, and continue to establish themselves as, an effective instrument for achieving sustainable trends and goals.

oekom research AG is one of the world's leading rating agencies for sustainable investments and has been actively shaping this market as one of its pioneers since 1993. The agency analyses businesses and countries with respect to their ecological and social performance. As an experienced partner of institutional investors and financial service providers, oekom research identifies those share and bond issuers which stand out with business practices that benefit society and the environment. Over 140 asset managers and asset owners in ten countries regularly use the rating agency's research in their investment decisions. As a result, oekom research's analyses currently have an influence on around €600 billion of assets under management.