7 July 2023

'Turning point' for green bond impact reporting standards

Impact reporting by green bond funds saw a transformational rise in standards over the past year, a report has found.

That was one of the key findings of Environmental Finance's Green Bond Fund Impact Reporting Practices 2023 report, a survey of fund manager and investors that serves as a free tool for gauging the current state of reporting in the market.

The survey found that the share of investors expressing dissatisfaction with current impact reporting practices fell from 70% of those surveyed in 2021, to 30% in 2022.

The proportion of investors surveyed citing poor data and greenwashing concerns as barriers to investment also saw a marked decrease.

"This reflects the efforts of green bond issuers and fund managers to improve standards, as well as dialogue between investors, issuers and fund managers," said the report.

The previous version of the report, a year ago, saw just eight funds providing monthly impact data. That number rose to 13 in this year's report. The number of funds reporting impact on a quarterly basis has increased to eight – up from just three last year.

However, the report also warns that there remain some funds for which little or no impact data is available.

Green bond funds are increasingly using third-party data providers to help them compile impact reports. The share of funds relying on issuers' public impact reports for data slipped to around half, while the number of fund managers calculating impact data internally shrunk to just 10%. There has been a corresponding rise in the share of fund managers engaging a third party to produce their impact report, to just under 30%.

Other key findings of the report include:

  • More green bond funds are investing in emerging markets and high-yield.
  • Social impact metrics are growing in importance, with some fund managers saying they intend to include more social metrics in future.
  • Investors are incorporating green bonds and fund investments into their portfolios at unprecedented levels.

"It has been a transformative year for standards," said Guy Richardson, report author.

"Looking ahead, the shift towards social metrics could result in the recalibration of fund mandates to include more social or sustainability bonds "When it comes to new launches especially, an increasing number of funds are likely to carry a sustainable rather than green label in future."

Click here to access the report.