More impact data can help encourage more sustainable bond issuance, but a lack of standardisation around reporting can cause challenges for investors, an Environmental Finance webinar heard.
Paul Horrocks, head of the private finance for sustainable development unit at the Organisation for Economic Cooperation and Development (OECD) Development Co-operation Directorate, said more impact data could provide a “tipping point” for the sector to facilitate more issuance.
“The message is clear from the market that data provides benchmarks and impact. Therefore, it's not only [about] the pricing of the bond, it's really the impact or shift in dynamics in creating further issuances and attracting more investors into the sector.”
Simone Utermarck, senior director for sustainable finance at the International Capital Market Association (ICMA), said impact data, particularly around key performance indicators (KPIs), is becoming more important for investors, although there are regional challenges to overcome.
She said: “What we still see – and maybe over time we'll see a little bit more harmonisation – is that issuers are not all reporting in the same units. That is often due to them being based in different regions, for example.”
Betina Vaz Boni, responsible investment officer at asset manager Cardano, said impact-focused data helps give it a better understanding of its investments and can help allocate to areas where it can have a greater impact”.
“We have client demands also,” she said. “They want to see where this [investment] is going. The challenge is especially [difficult] in impact data. It's not standardised.”
Lucas Rabiot, head of LGX operations, warned that in order to understand the true impact of an investment impact, data needs to be viewed in the context of allocation data.
He said: “From our perspective in handling both sides of the data, it really becomes striking to us how impact data can only make sense in the context of clear allocation data.
“If you have a report that highlights an impact figure of 100 tonnes of carbon dioxide [emissions avoided], to really understand this figure as an investor, you need to know what it relates to.
“Is it the impact of a single project? If it is, is it the impact of an entire project or only the impact of the portion of the project financed by the green bond that we are looking at? Or is it an impact figure that relates to a collection of projects, or an impact figure that relates to an entire bond as a whole?”
He added: “These are normal questions to have, but it's still a greater area for improvement … for greater clarity in reports [and] to make sure that impact data is always tied to allocation data. This will allow for more precise handling of the data and addressing the use cases.”