December 2, 2015 – The overall goal of the Green Bond market is to help mobilize private sector financing for sound climate- and environmentally-sustainable investments and help enhance transparency of environmental finance. The relevance of this market is growing rapidly – in 2014, issuances were over US$35 billion, more than three times higher than the US$11 billion issued the year before. The 2014 amount has been surpassed in 2015 to-date, with almost US$40 billion in new Green Bond issuance.
Today an informal working group of eleven International Financial Institutions* proposes a harmonized framework outline for impact reporting on projects to which Green Bond proceeds have been allocated. It is a revised version of the original draft published in March 2015 as the result of the first working group of four Multilateral Development Banks on the topic and expands the group of Green Bond issuers who proposes to use the agreed framework.
The work ongoing in this area reflects requests by the investor community as well as the conclusions of the 2015 Green Bond Principles - voluntary process guidelines that recommend transparency and disclosure and promote integrity in the development of the Green Bond market.
The Green Bond Principles “acknowledge that there are currently no established standards for impact reporting on Green Projects, and welcome and encourage initiatives, including those by leading green bond issuers, that help establish a model for impact reporting that others can adopt and/or adapt to their needs. Until more harmonization is achieved, transparency is of particular value, including disclosure of methodologies and key underlying assumptions.”
The harmonized framework outlines core principles and recommendations, proposes core indicators for two sectors - energy efficiency and renewable energy – and includes reporting templates, in order to provide issuers with a reference that they can adapt to their own circumstances as they develop their own reporting.
The proposal also aims to provide a basis for broader market consideration with the goal to establish Green Bond reporting principles that are shared by all market stakeholders. A dedicated forum has recently been established by the GBP-Executive Committee for this purpose and this document can serve as contribution to the upcoming debate.
The proposal does not, at this stage, cover impact reporting on projects outside the energy efficiency and renewable energy fields. However, the involved IFIs acknowledge the importance of harmonization also for such projects, and plan to develop additional suitable indicators for these other types of projects in the future.
* African Development Bank (AfDB), Agence Française de Développement (AFD), Asian Development Bank (ADB), European Bank for Reconstruction and Development (EBRD), European Investment Bank (EIB), Inter-American Development Bank (IDB), International Bank for Reconstruction and Development (IBRD), International Finance Corporation (IFC), Kreditanstalt für Wiederaufbau (KfW), Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden (FMO), and Nordic Investment Bank (NIB).
About the World Bank
The World Bank (International Bank for Reconstruction and Development, IBRD), rated Aaa/AAA (Moody’s/S&P), is an international organization created in 1944 and the original member of the World Bank Group. It operates as a global development cooperative owned by 188 nations. It provides its members with financing, expertise and coordination services so they can achieve equitable and sustainable economic growth in their national economies and find effective solutions to pressing regional and global economic and environmental problems. The World Bank has two main goals: to end extreme poverty and promote shared prosperity. It seeks to achieve them primarily by providing loans, risk management products, and expertise on development-related disciplines to its borrowing member government clients in middle-income countries and other creditworthy countries, and by coordinating responses to regional and global challenges. It has been issuing sustainable development bonds in the international capital markets for over 60 years to fund its activities that achieve a positive impact. Information on bonds for investors is available on the World Bank Treasury website: www.worldbank.org/debtsecurities
About Nippon Life
Nippon Life is Japan's leading private life insurer with approximate total assets of US$ 518 billion, revenues of US$ 61 billion and profits of over US$ 2.5 billion. To be certain that Nippon Life can pay future insurance claims and benefits, Nippon Life invests premiums entrusted to it from policyholders with sufficient consideration for safety, profitability, and the public nature of its business, among other factors. By spreading risk and allocating assets properly, Nippon Life aims to secure long-term stable investment returns. Nippon Life which has over 10 million policies in Japan, offers a wide range of products, including individual and group life and annuity policies through various distribution channels and mainly uses a face-to-face sales channel for its traditional insurance products. Nippon Life primarily operates in Japan, North America, Europe and Asia.