Green bonds, Sustainable or not?

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Green bonds, Sustainable or not?

Streamlining investing and reporting on green bonds 

Investing in green bonds is becoming increasingly popular. The amount of specialized investments funds is growing exponentially and new green bonds are mostly heavily oversubscribed. As also seen with the first Dutch green government bond. Also we are enthusiastic about Green bonds, but are also cautious about the potential outgrowth.

Point of view

The current framework of investing in green bonds tends to focus on positive selection criteria.  When offsetting this with more attention to so-called "negative selection criteria", the classification of green bonds is more balanced. We see that the current framework does not take sufficient account of the ‘do not harm’ principles, as formulated in the elaboration of the EU Action Plan on Financing Sustainable Growth. As a result, polluting activities or activities that make insufficient contribution at the core can nevertheless qualify for green bonds.

We also see that the current framework is static, while the "sustainability bar" is constantly being raised. That this bar is constantly being raised is a necessity to realize our climate goals and goals in the field of circularity. As a result, initiatives can be labeled as green, while according to academics, politicians and the public this is no longer the case.

There are parallels with the conclusions from the study on a taxonomy for the circular economy that Deloitte has recently carried out for the Ministry of Infrastructure and Water Management that will be published shortly. We are looking forward to the new green bond framework that will be presented. And to what extent it can mitigate the risks of sprawling.

Main steps to take

What are the main steps your organization can take when investing in green bonds.

  • Introduce a framework of classifying your green bonds. In this frame, negative selection criteria are introduced to prevent sprawling
  • Identify activities for green funding
  • Introduce consistency and clarity on your investment decision-making process and how to report on green bonds. This should ensure that financial market participants that receive a mandate from their clients or beneficiaries to clarify on their green bond investments.
  • Provide assurance over the green bonds, to comply with upcoming regulations and to have your data reliable.
  • Monitor the activities that are financed through green bonds to assess if the performance of your green bonds still comply with your set classification framework.

More information?

Our dedicated sustainability team, in connection with all our internal experts, is ready to accompany your organization towards the investment in green bonds. Please contact Harvey Christophers, Eric de Weerdt or Anne-Claire van den Wall Bake-Dijkstra via the contact details below.

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