Climate Bonds releases Post Issuance Reporting in the Green Bond Market 2021, a comprehensive review of green bond post issuance reporting practices, supported by critical reflections on past and future market trends, within and beyond UoP instruments
Climate Bonds Initiative releases Post-Issuance Reporting in the Green Bond Market 2021, looking into the availability and attributes of use-of-proceeds (UoP) and impact disclosure among green bonds. Supported by the Inter-American Development Bank (IDB), UniCredit and Lyxor ETF.provides, the report supplies an in-depth review of green bond reporting, shedding light on post-issuance reporting practices and identifying avenues for further improvement in this space. The analysis is based on a review of green bonds included in the Climate Bonds Green Bond Database issued between Q4’17 and Q1’19, with the bulk of the research conducted in mid-2020.
The overarching goal of this research report is to facilitate the continued evolution of sustainable finance – many topics are therefore covered, some of which are quite complex, especially related to impact reporting.
Aimed at investors, issuers, regulators and other finance professionals the report provides an understanding of the status quo and future of sustainability reporting.
Availability of post-issuance reporting is widespread, but UoP still more commonly reported than impacts:
• 77% of issuers representing 88% of the amount issued provided use-of-proceeds (UoP) reporting
• Drops to 59% of issuers and 74% of the amount for impacts
• 57% of issuers and 73% of the amount have both UoP and impact reporting
• Amount issued share is higher as larger issuers are more likely to report
• Reporting share has increased versus early stages of the market (especially on impacts) and also in recent
years, albeit by a smaller margin
Greenwashing is very rare: report estimates, almost all non-reporting issuers at the time of research have now reported at least UoP. In addition, no bonds were excluded from our database following the postissuance research, reflecting a robust database methodology and fact that issuers genuinely finance green projects/assets.
It is rare to find any segment of the market with more non-reporting than reporting issuers, but there are variations in availability of reporting depending on deal size, external reviews, issuer type and geography, for example:
• Reporting share higher among larger deals and larger issuers, as well as in deals with external review (especially post-issuance)
• Private sector issuers most polarised in terms of reporting availability, with financial corporates ranking first and non-financials last – in broad terms, public sector issuers exhibit more consistency.
• Developed Markets (DM) tend to have higher share (and quality) of reporting, but relationship is not perfect and there are several exceptions (especially small markets due to added variance)
The quality and consistency of reporting vary more significantly: key aspects include providing clear, easily
accessible and granular information, as well as reporting in line with commitments at issuance and obtaining
external reviews. The ethodology applied scored issuers out of a total of 25 points, and found that :
• The average quality remained stable compared to 2019 study, and there was still some improvement, including fewer low-quality reporters
• Large deals do not necessarily have higher-quality reporting: average, median and maximum scores relatively constant for all deal sizes, although there is a clear increase in minimum scores, i.e., larger deals less likely to have poor-quality reporting
• European entities are most consistent in quality, with 110 issuers ranging between 10–25 points; AsiaPacific has a 6–25 range, and North America’s range is also wider than Europe’s even though its issuer count is about half
• More than just having high-scorers, more mature green bond markets have consistently good-scoring issuers
• Spain is the country with most high scorers (previously France), with four scoring at least 24 points; Hong Kong follows, with three
An expanding market, together with increasing guidance and developments in reporting practices, have contributed to a rich and varied reporting landscape. However, this varied landscape is difficult to navigate and could cause ambiguity for investors and analysts of the green bond market.
Harmonisation of disclosure must be the priority, in the absence of a common framework to report within, issuers must independently plan, create and publish green bond reports. A common standardised reporting framework and platform leading to greater availability, quality and consistency of disclosure globally is an important next step in the green bond market.
Beyond UoP instruments there is an urgent need for comprehensive sustainability reporting to create a purpose-driven economy with impact measurement at its core.
“Beyond the attention investors initially pay to selecting the right investments in quality green bonds, they now require the traceability of projects and assets they are financing. This extra due diligence gives them a better way to understand the ESG impact of their investments by measuring to what extent they contribute to society and to their own carbon neutrality objectives. This is why assessing, and benchmarking issuer reporting is fundamental to support best practices”.François Millet, Head of ETF Strategy, ESG & Innovation, Lyxor
“Tackling the climate crisis necessitates a fundamental shift in how we invest capital. Ambitious frameworks driving low-carbon investment through transparent reporting mechanisms must be deployed throughout the global market. Progress towards harmonising definitions on sustainable activities has begun, marking a positive display of cooperation in the market. This should now be followed by a uniform approach to reporting standards that inspires confidence in the integrity of the unrelenting green bond revolution”.Sean Kidney, CEO, Climate Bonds Initiative
The Post Issuance Reporting in the Green Bond Market 2021report is available here
Source: Climate Bonds Initiative