Apart from James, the hottest (or coolest, if you like) Bond you need to know about is Green. Green Bonds beautifully combine sustainable goals with financial ones and are gaining popularity rapidly across our pale blue dot.
Here's what they are about, summarized in five simple points -
1. Core components -
A green bond is a financial instrument whose proceeds will be used exclusively for Green Projects that are aligned with the core components of the Green Bond Principles (GBP). These core principles are as follows -
a. Use of proceeds (how you use the money raised)
b. Process for Project Evaluation and Selection (involving environmental sustainability objectives)
c. Management of proceeds (ensuring high level of transparency)
d. Reporting (annual reports with quantitative performance indicators)
2. The five high level environmental objectives -
These objectives are climate change mitigation, climate change adaptation, natural resource conservation, biodiversity conservation and pollution prevention and control.
3. External reviews -
The issuer of Green Bonds can seek external review in the form of second party opinions, verifications, certifications and/or Green Bond rating.
4. Types of Green Bonds -
There are many types of Green Bonds in the market and the list is constantly growing. However, some of the common ones are Standard Green Use of Proceeds Bond, Green Revenue Bond, Green Project Bond and Green Securitised Bond.
5. Voluntary guidelines -
All of the principles for issuing Green Bonds are voluntary guidelines and are issued by the International Capital Market Association (ICMA). Local laws and regulations override these principles in case of any conflict.
The sharp growth of Green Bonds across the globe is shown by the graph (source - Bloomberg) where the capital raised has sky-rocketed from under $40B in 2014 to over $160B in 2017.
Fun fact - The Province of Ontario successfully raised $1 billion through issue of Green Bonds in Jan, 2018 and has raised over $3 billion through all the issues combined.
To learn more about Green Bonds, you can read at -
https://www.icmagroup.org/green-social-and-sustainability-bonds/resource-centre/
Here's what they are about, summarized in five simple points -
1. Core components -
A green bond is a financial instrument whose proceeds will be used exclusively for Green Projects that are aligned with the core components of the Green Bond Principles (GBP). These core principles are as follows -
a. Use of proceeds (how you use the money raised)
b. Process for Project Evaluation and Selection (involving environmental sustainability objectives)
c. Management of proceeds (ensuring high level of transparency)
d. Reporting (annual reports with quantitative performance indicators)
2. The five high level environmental objectives -
These objectives are climate change mitigation, climate change adaptation, natural resource conservation, biodiversity conservation and pollution prevention and control.
3. External reviews -
The issuer of Green Bonds can seek external review in the form of second party opinions, verifications, certifications and/or Green Bond rating.
4. Types of Green Bonds -
There are many types of Green Bonds in the market and the list is constantly growing. However, some of the common ones are Standard Green Use of Proceeds Bond, Green Revenue Bond, Green Project Bond and Green Securitised Bond.
5. Voluntary guidelines -
All of the principles for issuing Green Bonds are voluntary guidelines and are issued by the International Capital Market Association (ICMA). Local laws and regulations override these principles in case of any conflict.
The sharp growth of Green Bonds across the globe is shown by the graph (source - Bloomberg) where the capital raised has sky-rocketed from under $40B in 2014 to over $160B in 2017.
Fun fact - The Province of Ontario successfully raised $1 billion through issue of Green Bonds in Jan, 2018 and has raised over $3 billion through all the issues combined.
To learn more about Green Bonds, you can read at -
https://www.icmagroup.org/green-social-and-sustainability-bonds/resource-centre/
