The International Finance Corporation (IFC) and Environmental Finance have published a report that provides a detailed snapshot of trends in emerging market (EM) financial institution green bond impact reporting.
The Emerging Market – Banks, Bonds and Impact study finds that just over half of EM financial institutions (FIs) that have issued green bonds more than a year earlier have published impact reports – compared with more than four-fifths among developed market FI issuers.
Recognising the additional challenges faced by EM FIs in preparing green bond impact reports – including additional challenges around data gathering and aggregation – the exclusive study outlines several 'best practice' impact reporting actions EM FIs should adopt as they move from pre- to post-reporting for their green bond programmes.
Among the 'best practice' proposals, EM FIs are recommended to choose 'green' projects based on their ability to provide impact data. To assist in communicating these impact reporting expectations to potential recipients of green bond proceeds, EM FI issuers are encouraged to develop transparent, externally reviewed green bond frameworks that are aligned with international principles.
Investors consulted as part of the survey also emphasised the importance of transparency about the methodologies used in impact reports, with the survey revealing that less than half of those EM FIs that had published impact reports provided a methodological explanation of the impact data they present.
"Reporting is key to transparency in sustainable finance instruments such as green, social and sustainability bonds," said IFC climate finance and policy manager Anup Jagwani.
"Investors want to know how their money is invested and what the impacts of these investments are. Standardisation of impact metrics and methodology is essential for investors to be able to aggregate data and measure impact across their portfolio of green, social and sustainability bonds in line with their sustainable investment strategy and in compliance with developing regulation."
"This report, analysing the reporting practice of financial institutions in emerging markets, underscores that transparency is essential to build market credibility, mitigate greenwashing and grow the market," he added.
To read the full Emerging Market – Banks, Bonds and Impact study for further insights, click here. Further IFC and Environmental Finance prepared webinars, reports and case studies, and training materials on green bonds can be found on the dedicated "Creating Green Bond Markets" resource page.