Green rooftop

How Green are Green Bonds?

Tony Edwards Ethical Investing - General Background

The world has played fast and loose with the word “green” for many, many years now. Everyone wants to use the green label these days, but green is not black and white, and we live in a world of shades and hues.

Green bonds are meant to provide financing to solve environmental problems. The issuer of a green bond could be government at any level, or corporations both large and small. In return for the use of your capital, issuers will agree to pay you a set interest rate for a certain period of time, and then return your capital. Pretty simple really.

It is now much easier to source green bonds, and options continue to multiply as this “capital with purpose” approach takes root. But to be labelled ‘green’, the bonds should meet criteria laid out by the International Capital Markets Association:

Eligible Green Project categories include, but are not limited to:

  • renewable energy (including production, transmission, appliances and products);
  • energy efficiency (such as in new and refurbished buildings, energy storage, district heating, smart grids, appliances and products);
  • pollution prevention and control (including reduction of air emissions, greenhouse gas control, soil remediation, waste prevention, waste reduction, waste recycling and energy/ emission‐efficient waste to energy);
  • environmentally sustainable management of living natural resources and land use (including environmentally sustainable agriculture; environmentally sustainable animal husbandry; climate smart farm inputs such as biological crop protection or drip‐irrigation; environmentally sustainable fishery and aquaculture; environmentally‐sustainable forestry, including afforestation or reforestation, and preservation or restoration of natural landscapes);
  • terrestrial and aquatic biodiversity conservation (including the protection of coastal, marine and watershed environments);
  • clean transportation (such as electric, hybrid, public, rail, non‐motorised, multi‐modal transportation, infrastructure for clean energy vehicles and reduction of harmful emissions);
  • sustainable water and wastewater management (including sustainable infrastructure for clean and/or drinking water, wastewater treatment, sustainable urban drainage systems and river training and other forms of flooding mitigation);
  • climate change adaptation (including information support systems, such as climate observation and early warning systems);
  • eco‐efficient and/or circular economy adapted products, production technologies and processes (such as development and introduction of environmentally sustainable products, with an eco‐label or environmental certification, resource‐efficient packaging and distribution);
  • green buildings which meet regional, national or internationally recognised standards or certifications.

The comments and opinions expressed herein reflect the personal views of Tony Edwards and Joss Biggins. They may differ from the opinions of Leede Jones Gable Inc. and should not be considered representative of the research beliefs, opinions, or recommendations of Leede Jones Gable Inc. The information included in this document, including any opinion and linked sites, is based on various sources believed to be reliable, but its accuracy and completeness is not guaranteed and Leede Jones Gable Inc. does not assume any liability in providing it. The information provided is current as of the date appearing on the document and Leede Jones Gable Inc. does not assume any obligation to update the information or give a description of further developments relating to the securities or material discussed. © Leede Jones Gable Inc. 2020. Member CIPF and regulated by IIROC