Chapter 2: Background
3.5. Conclusions and policy implications
This paper investigated the extent to which green bond proceeds were allocated to projects and assets aligned with SDG and NDC-related environmental outcomes. It is evident
79
Table 3.4: Green bond proceeds allocations with reported environmental impact estimates
1 - Allocation amounts expressed in constant 2010 USD; 2 - Annual greenhouse gas (GHG) emission reductions measured in tonnes of carbon dioxide equivalent (tCo2e); 3 - Renewable energy (RE) capacity added measured in megawatts (MW);4 - Annual RE generation and energy savings measured in megawatt hours (MWh);
Source: Created by author based on post-issuance and investor reports of the 53 institutions assessed in this study
Proceeds Allocation Details Environmental Impact Estimates
Institutions Years Amount1 Frequency
Annual GHG emissions reduced/avoided
(tCO2e)2
RE capacity added (MW)3
Annual RE generation added
(MWh)4
Annual energy savings (MWh)
ABN AMRO 2015 - 2016 $1,516,348,341 9 22,332 22,419 91,507
ASE 2015 $279,403,821 10 114,000
AfDB 2009, 2012 - 2016 $988,349,554 18 3,207,161 302 841,280 277,676
ADB 2010 - 2016 $1,404,080,121 35 10,618,300 3,173 9,903,720 4,276,632
Bank of America 2013 - 2016 $1,365,025,154 16 1,531,800
BRF S.A. 2016 $8,343,574 16 7,545 900 49,200 42,608
City of Gothenburg 2013 - 2015 $399,562,801 11 7,088 26,500
City of Paris 2016 $148,777,442 9 27,889 1 44,833
EBRD 2012 - 2013 $177,089,604 6 199,060
EIB 2016 - 2017 $5,195,725,181 99 11,594,244 3,721 39,711
Fortum Värme 2015 $272,673,210 6 641,000 71,000
Groupe BPCE 2013 - 2016 $143,985,312 15 282,365 220 428,822
Hera S.P.A. 2008 - 2017 $500,751,227 21 1,138,571 3,158,597 291,141
HSBC 2016 $799,716,471 21 7,067,500 2,663
Île-de-France 2014 - 2017 $1,601,338,139 120 232,207 141
IFC 2015 - 2017 $3,144,251,904 101 8,456,329 3,842 10,193,347 638,397,712
KBN 2008 - 2016 $1,694,585,748 63 40,789 348,000 148,657
Kommuninvest 2016 - 2017 $2,107,885,659 146 514,944 2,058,640 137,104
NAB 2017 $872,368,012 31 2,062,663 12,647,084
FMO 2011 - 2017 $835,838,806 88 373,333 2,571 1,502
NIB 2011, 2013 - 2017 $2,377,744,037 53 616,800 1,174,736 3,416,000
Ontario Financing Authority 2017 $1,814,946,619 13 600,000
Örebro Municipality 2014 - 2016 $119,183,038 14 40,000 0.042 48 2,434
Regency Centers, L.P. 2017 $219,768,683 9 201 5,907
Southern Company 2015 - 2017 $2,837,581,787 11 6,643,136 1,657 8,991,370
TD Bank 2015 $524,768,641 7 16,195 26,781
TenneT Holding B.V. 2015 - 2017 $5,043,550,771 8 7,460,000 6,156 14,160
World Bank IBRD 2008 - 2016 $7,473,235,366 83 42,939,116 3,781 18,158,260 80,810,670
Yes Bank 2015 $86,479,944 2 2,300,000 132
Total 2008 - 2017 $43,953,358,968 1,041 108,754,366 tCO2e 1,551,854 MW 57,303,917 MWh 737,235,746MWh
80
that green bond markets are expanding, and renewable energy and other projects that address high-priority GHG emissions reduction targets received greater proportions of green bond proceeds. While many IFIs provided detailed, consistent, up-to-date post-issuance assessments, other institutions often failed to publish reports that articulate environmental impact estimates of proceeds-recipient projects and assets. This not only obfuscates the marginal impact of proceeds on progress towards policy targets in key countries (especially BRICS economies with high climate and sustainable development investment needs), but also may lead to information gaps that undermine or fail to bolster investor confidence.
Importantly, many post-issuance reports also do not clearly identify the additionality of green bond impacts. This renders it difficult to derive the connections between SDG and NDC-oriented environmental outcomes and green bond finance vehicles. In order to address this issue and more effectively aid investors, financiers, and policymakers in environmental finance decision-making, future reporting should, as a rule of thumb, provide explicit, accurate, and transparent information regarding additional versus non-additional environmental impacts.
Moreover, current reporting often does not track a wider array of sustainability and climate metrics. While energy and greenhouse gas-related measurements are more routinely provided, those pertaining to water and wastewater systems, waste management and recycling, ecosystem preservation, sustainable forest management, and other aspects pertinent to multiple SDGs and climate change adaptation objectives of the Paris Agreement are lacking. At a time when explicit adaptation criteria are needed to measure country-level progress and guide international discourse (Magnan & Ribera, 2016), forthcoming reporting should include a broader spectrum of impact criteria. This would lay the groundwork for the universal environmental standards crucial to investors in assessing the green risks of their investment
81
portfolios (Clapp et al., 2015). Improved impact reporting thus would make green investment opportunities more identifiable, thereby expanding the transnational, green-conscience investor bases needed to achieve the SDGs by 2030 (Vorosmarty et al., 2018).
Finally, recent reporting suggests that current proceeds allocation trends are insufficient for addressing the pressing, global investment challenges of the 21st century. For example, investing $26 billion to renewable energy over nine-year time periods (as occurred with green bonds in the scope of this study) would stop short of the “$53 trillion by 2035” energy
investment directive of the IEA (2014). In the meantime, should global GDP continue to grow at up to 3.9% per year (as it did in 2018), the environmental benefits generated by recent green bond investments would provide only minor contributions to what would be needed to curb the effects of the roughly 37 gigatonnes (Gt) of CO2 emissions estimated to result from such growth (Jackson et al., 2015). This shortfall is exacerbated by recent projections that by 2020,
overlooked “damage and loss” costs of climate change could reach $50 billion per year (Nature Climate Change, 2017). Thus, it is clear that a drastic scaling up in green bond financing, in conjunction with substantially greater applications of other environmental finance mechanisms, will be required to address a potentially broadening scope of SDG and Paris Agreement
investments. Nevertheless, the rate at which green bond proceeds allocations are growing suggests that they are gaining prominence within the broader context of environmental finance and still stand as viable financing instruments for advancing the outcomes of both agendas.
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Appendix 3A
Since the first European Investment Bank (EIB) Climate Awareness Bond in 2007, the green bond market has expanded to include some $895 billion outstanding among 3,493 labelled (e.g. earmarked for green projects or assets) and unlabelled (e.g. conceptually aligned with low-carbon initiatives) bonds from 1,128 issuers by 2017 (CBI, 2017a).Common varieties include corporate and SSA (sovereign, supranational, and agency) bonds, project bonds, asset-backed securities, and financial bonds, while prominent issuers include financial and non-financial corporations, national and local governments, international finance institutions, government agencies, and state-backed entities. As with conventional bonds, green bonds can be classified depending upon their uses, debt recourse and other unique features. Table 3A provides a detailed list of the aforementioned 53 impact-reporting issuers assessed in this study and the frequency and volumes of their respective proceeds allocations
88 Table 3A: Green bond allocating institutions
a - Total number of green bond proceeds allocations; b - Total allocation volumes in constant 2010 USD;
Source: Created by author based on post-issuance and investor reports from the 53 institutions assessed in this study
Region (#) Country (#) Period Frequencya Volumeb
Corporation: Financial Institutions (9) (4) (8) 2013 - 2017 158 $9,787,385,637
ABN AMRO European Economic Area Netherlands 2015 - 2016 9 $1,516,348,341
Bank of America North America United States 2013 - 2017 18 $1,456,573,196
Berlin Hyp AG European Economic Area Germany 2017 15 $546,781,391
Groupe BPCE European Economic Area France 2013 - 2016 15 $143,985,312
HSBC European Economic Area United Kingdom 2016 - 2017 40 $1,333,598,233
National Australia Bank (NAB) Oceania Australia 2015, 2017 48 $1,557,443,652
Toronto Dominion (TD) Bank North America Canada 2015 7 $524,768,641
Toyota Motor Credit Corporation North America United States 2014 - 2016 3 $2,605,619,951
Yes Bank South Asia India 2015, 2017 3 $102,266,921
Corporation: Non-Financial Institutions (12) (5) (7) 2014 - 2017 125 $6,544,946,538
Abengoa Greenfield, S.A. European Economic Area Spain 2014 7 $607,610,584
Advanced Semiconductor Engineering (ASE) East Asia Taiwan 2015 10 $279,403,821
Belectric GmbH European Economic Area United Kingdom 2014 - 2015 4 $21,933,970
BRF S.A. Latin America and Caribbean Brazil 2016 16 $8,343,574
Digital Realty Trust, Inc. North America United States 2016 9 $447,958,934
Fastighets AB Förvaltaren European Economic Area Sweden 2015-2016 4 $74,480,028
NRG Yield, Inc. North America United States 2014 1 $460,545,389
Regency Centers, L.P. North America United States 2017 9 $219,768,683
Southern Company North America United States 2015 - 2017 11 $2,837,581,787
Stångåstaden AB European Economic Area Sweden 2015 - 2017 16 $146,876,611
Stockland Trust Management Ltd. Oceania Australia 2015 - 2017 24 $888,040,999
Vasakronan European Economic Area Sweden 2016 14 $552,402,157
Gove rnme nt Age ncie s (6) (2) (4) 2008 - 2017 286 $6,258,303,853
Central Puget Sound Transit Authority North America United States 2015 - 2016 15 $1,386,311,716
Kommunalbanken Norway (KBN) European Economic Area Norway 2008 - 2016 63 $1,694,585,748
Kommuninvest European Economic Area Sweden 2016 - 2017 146 $2,107,885,659
Overseas Private Investment Corporation (OPIC) North America United States 2014 - 2016 13 $274,329,689
San Francisco Public Utilities North America United States 2015 - 2016 44 $302,582,033
Transport for London (TfL) European Economic Area United Kingdom 2016 5 $492,609,007
Inte rnational Finance Institutions (9) (4) (8) 2008 - 2017 500 $22,859,963,043
African Development Bank (AfDB) Sub-Saharan Africa Côte d’Ivoire 2009 - 2016 20 $1,020,240,560
Agence Française de Développement (AFD) European Economic Area France 2011 - 2016 6 $765,699,020
Asian Development Bank (ADB) Southeast Asia Philippines 2010 - 2016 35 $1,404,080,121
European Bank for Reconstruction and Development (EBRD) European Economic Area United Kingdom 2008 - 2013 12 $635,342,436
European Investment Bank (EIB) European Economic Area Luxembourg 2016 - 2017 99 $5,195,725,181
International Finance Corporation (IFC) North America United States 2015 - 2017 101 $3,144,251,904
Netherlands Development Finance Company (FMO) European Economic Area Netherlands 2009 - 2017 91 $843,644,418
Nordic Investment Bank (NIB) European Economic Area Finland 2011 - 2017 53 $2,377,744,037
World Bank International Bank for Reconstruction and Development (IBRD) North America United States 2008 - 2016 83 $7,473,235,366
Municipal Gove rnme nts (4) (2) (3) 2013 - 2016 52 $1,009,118,439
City of Gothenburg European Economic Area Sweden 2013 - 2015 11 $399,562,801
City of Paris European Economic Area France 2015 - 2016 15 $261,068,890
City of Saint Paul, Minnesota North America United States 2016 7 $2,807,225
Örebro Municipality European Economic Area Sweden 2014 - 2016 14 $119,183,038
State or Provincial Gove rnme nts (6) (2) (5) 2014 - 2017 634 $4,987,341,655
Île-de-France European Economic Area France 2014 - 2017 120 $1,601,338,139
New York State Environmental Facilities Corporation North America United States 2014 - 2016 289 $834,102,853
Province of Ontario Financing Authority North America Canada 2017 13 $1,814,946,619
State of California North America United States 2014 10 $276,167,684
State of Connecticut Department of Energy and Environmental Protection North America United States 2015 - 2017 202 $460,786,360
Stockholm County Council European Economic Area Sweden 2014 - 2015 5 $226,496,485
State -Backe d Ente rprise s (4) (1) (4) 2008 - 2017 79 $1,589,856,539
Bergenshalvøens Kommunale Kraftselskap (BKK) European Economic Area Norway 2014 - 2017 43 $346,795,743
Fortum Värme European Economic Area Sweden 2015 6 $272,673,210
Hera S.P.A. European Economic Area Italy 2008 - 20104 21 $500,751,227
Verbund AG European Economic Area Austria 2013 - 2015 9 $469,636,360
State -Owne d Ente rprise s (3) (1) (3) 2015 - 2017 17 $5,198,814,826
Latvenergo European Economic Area Latvia 2015 6 $102,158,676
TenneT Holding B.V. European Economic Area Netherlands 2015 - 2017 8 $5,043,550,771
Uppsalahem AB European Economic Area Sweden 2016 3 $53,105,379
53 Institutions 8 Re gions 20 Countrie s 2008 - 2017 1851 $58,235,730,531
Institutions (#) Domicile Allocations
89