The International Capital Market Association (ICMA) on Thursday released an updated edition of its Green Bond Principles, which strengthens best practices for issuers of green bonds.
The market for green bonds, which are issued to raise capital for projects with environmentally sustainable benefits, has “grown substantially” over the past couple of years, according to the Zurich-based ICMA, with issuance topping US$28 billion.
The updated principles aim to standardize transparency and disclosure around core components such as use of proceeds, the process for evaluating and selecting projects, the management of proceeds, and reporting.
They also recommend best practices on reporting and external reviews that should “add significantly to market transparency,” the trade group says.
The updated principles also set out guidance for the type of external reviews that issuers are recommended to use to demonstrate their environmental project selection processes and their adherence to the principles. Additionally, the reporting recommendations have generally been strengthened, the ICMA says.
“The Green Bond Principles have gained broad market acceptance, as a means of driving transparency and accountability. Growth of issuance referencing the GBP underlines the market relevance of such guidelines,” says Eila Kreivi, chairwoman, Green Bond Principles, and head of capital markets at the European Investment Bank. “This new edition of the Green Bond Principles demonstrates that the GBP are adjusting to market developments and evolving best practice.”
Urban Angehrn, chief investment officer (CIO) at Zurich Insurance Group, adds: “Sustained growth in this market critically depends on the support from all the different stakeholders, and this new edition of the Green Bond Principles brings improvements for all of them. From an investor perspective, clarifications on the expected reporting as well as the guidance on social bonds are particularly welcome.”