Sustainable, green and social bonds
The business challenge and the investment opportunity
Sustainable development, namely climate change mitigation and adaptation, is costly. Trillions of dollars are needed to achieve a more sustainable world: from more resilient infrastructures, to renewable energy, to water for all. The good news is that trillions of dollars are also available, for instance in the traditional bonds market. Some of that capital is already being shifted towards green bonds for instance. Green bonds are normal bonds, but with the capital being used to finance or refinance green projects, such as energy efficiency. The green bonds market is growing fast with $81 billion issued in 2016 and more than $100 billion expected to be issued in 2017. La buena noticia es que se dispone de esos billones de dólares, por ejemplo, en el mercado tradicional de bonos. Parte de ese capital ya está siendo desplazado hacia los bonos verdes. Los bonos verdes son bonos tradicionales, pero el capital es usado para financiar o refinanciar proyectos verdes como lo es la energía eficiente. El mercado de bonos verdes está creciendo rápidamente con $ 81 mil millones emitidos en el 2016 y se espera que más de $ 100 mil millones sean emitidos en el 2017.
How to ensure the integrity of your bond?
Green and other sustainability bonds demand transparency, disclosure and integrity. SUST4IN helps its clients through non-financial services such as:
- Review of the sustainability performance, strategy and the business case for the bonds issuance
- Design of the bond framework, including the disclosure of how proceeds will be managed and
allocated, plus the possible alignment with the Sustainable Development Goals (SDGs). - Identification of eligible assets and projects potentially compliant with the Green Bond Principles,
and with applicable standards, guidelines, criteria and other relevant references and requirements - Design of a measurement and reporting framework and key performance indicators to demonstrate
positive environmental and/or social impact - Development of an Information Memorandum containing the information required by investors
and other stakeholders - Support during road show/meetings with potential investors
- Impact reporting: review of the adherence of the use of proceeds to the projects defined at
issuance and reporting of key performance indicators.
Who should be interested?
Organizations, including companies, financial institutions and governments, with planned or existing eligible projects and assets in sectors such as energy, water, transport, building, waste, agriculture, but also consumer companies or even coffee shops. Investors are already interested and driving the market as they also have clear benefits in a win-win situation.
Benefits to the issuer
- Investor diversification: investors from various origins often oversubscribe issuances
- Meet Corporate Social Responsibility requirements: investment with meaning
- Brand value and positive message: both at external and internal levels
Benefits to the investor
- Meet Environmental, Social & Governance (ESG)/Socially Responsible Investment (SRI) criteria
- Same coupon and risk level as traditional bonds
- Evidences of a stronger secondary market
FAQs
What exactly is a sustainable, social or green bond?
These bonds are debt instruments, similar to traditional bonds in terms of deal structure, but they have different requirements for reporting, auditing and proceed allocation, as the issuer needs to demonstrate that the projects or assets will bring environmental and/or social benefits. These additional requirements also provide marketing and branding value, absent from traditional bonds.
Who can issue a sustainable bond? What are the typical sizes and maturities?
Any organization with bonding authority can issue a sustainable bond. It does not even need to be a “pure play” green or social organization. Sizes vary from $10 million to $3 billion. Maturities vary from 3 to 25 years.
