Best practice guidelines and growing need for universal definitions of green
Voluntary best practice guidelines called the “Green Bond Principles” were established by a consortium of investment banks: Bank of America Merrill Lynch, Citi, Crédit Agricole Corporate and Investment Bank, JPMorgan Chase, BNP Paribas, Daiwa, Deutsche Bank, Goldman Sachs, HSBC, Mizuho Securities, Morgan Stanley, Rabobank and SEB. Currently, there are 55 members of the Principles. Ongoing monitoring and development of guidelines has since moved to an independent secretariat hosted by the International Capital Market Association (ICMA).
The Principles highlight the importance of tracking proceeds, allocated funds to eligible projects and providing periodic reports on use of proceeds.
The Green Bond Principles do not provide details on “green”. The green definitions are left to the issuer to determine. Broad green project categories suggested by the principles include:
- Renewable energy
- Energy efficiency (including efficient buildings)
- Sustainable waste management
- Sustainable land use (including sustainable forestry and agriculture)
- Biodiversity conservation
- Clean transportation
- Clean water and/or drinking water
World Bank and IFC have their own criteria or definitions of eligible green projects. The Climate Bond initiative is also helping to fill this gap by providing green definitions that are sector specific, developed by scientists and industry experts, These are available as a public good on the CBI website.