Green Bonds Should Have Green Strings Attached
It’s cheap for governments and firms to raise cash via so-called green bonds. We need a framework that hurts in the wallet if green promises are broken.
Green bonds are hot — but are they really helping to combat climate change?
Photographer: Lionel Bonaventure/AFP
The bond market is finally finding its conscience. Egged on by investors, companies and countries are rushing to sell debt billed as helping to combat climate change or advance social goals. The impending arrival of the European Union in this area is an opportunity to address some of its early flaws.
While greater environmental awareness is to be welcomed, linking it to finance requires a coherent structure. The idea behind these bond sales is that the proceeds are, at least partly, tied to action on sustainability. But the existing protocol — contained in tentative guidelines from trade body the International Capital Markets Association — allows plenty of room for interpretation. It would be better if there was a requirement for measurable results, instead of just painting debt in a different color.