There has been tremendous growth in green bonds as the benefits become more apparent to both investors and issuers.
The corporate sector has increased — in fact tripled — its participation in the green bonds market as energy, automotive and even consumer goods and technology companies have looked to green bonds as a way to finance important sustainability investments.
In the past year, an increasing amount of companies have realized the multiple benefits gained by issuing green bonds.
Here are some big reasons why:
1- Green bond principles
To be seen as green by investors, green bonds often need to voluntarily comply with a set of disclosure requirements.
The most common of these is the Green Bond Principles, which provides issuers guidance on launching a green bond and outlines the necessary information investors would need to evaluate its environmental impact.
Aligning with the Principles can help companies tailor their sustainability strategy to the investor audience, as well as provide an opportunity to create performance indicators to ensure the use of green bond proceeds.
Current research describes the benefits of getting finance and sustainability teams talking to each other.
Not only do finance teams have the opportunity to attract new investors and understand a wider view of business risks and opportunities, but sustainability teams can improve their understanding of investor perspectives.
They clearly communicate the financial value of a company’s sustainability efforts, and in the case of green bonds, access capital for those efforts.
3- Capital for sustainability
The most obvious benefit of green bonds for companies is that they can provide much needed capital for sustainability-related projects.
Often, sustainability departments operate with lean budgets, but supporting a company’s transition to a cleaner future can require significant upfront investments.
4.Popularity amoung investors
Green bonds are also rising in popularity among investors. For investors, green bonds allow them to invest in sustainable products and initiatives without taking on additional risk, even helping to hedge against certain types of climate risk.
Alnes from CICERO agreed: “So far, investor interest has outpaced supply, driven both by a desire to invest in sustainable products and to use green bonds as a hedging tool against climate risk.”
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