Green Bond Principles call for members of new Advisory Council, launch impact handbook

Axa releases guidelines for new ‘transition bond’ asset class

The Green Bond Principles (GBP) – the governing body and standard setter for the global green bond market – is seeking members for a new Advisory Council it will launch at the end of summer, to help it with global outreach and specific areas of expertise.
The announcement was made at the GBP’s AGM in Frankfurt today, and members will be chosen by the existing Executive Committee of the Principles, to whom they will offer support on developing the guidelines.
Applicants must be members or observers of the GBP – of which there are currently some 350 – and are particularly welcome if they have expertise in specialist areas including legal issues, infrastructure and regional developments. Those outside Europe are being strongly encouraged to apply.
“The Council should have a broad outreach, to facilitate the global developments of the Green and Social Bond Principles,” explained Lars Eibeholm, Head of Treasury and Sustainability Ratings at the Nordic Investment Bank, and Chair of the GBP’s Executive Committee. “I really encourage all members and observers that are interested in taking a role to apply for the Council.”
Alongside the creation of the new body, the GBP, which is part of the International Capital Markets Association, has launched an Impact Reporting Handbook. The document, it says, “brings together in one publication, a series of impact reporting frameworks for eligible green categories covering several sectors, released since 2017” and has been supported by a number of multilateral development banks and other public financial institutions.
Sectors include Sustainable Water & Wastewater Management Projects, Sustainable Waste Management and Resource-Efficiency Projects, Clean Transportation Projects and Green Building Projects.
The GBP also used the AGM as an opportunity to launch material on how its green eligibility criteria compares to other, similar classification systems – a move which Johanna Kob, Head of Responsible Investment at Zurich Insurance and Vice-Chair of the GBP’s Executive Committee, said “will ease comparison between frameworks”. It’s not the first bid to ‘map’ the growing number of guidelines for what counts as a green investment – the European Investment Bank has been working closely with the People’s Bank of China to compare and harmonise the definitions that have been developed by both bodies, and in April, RI reported that the OECD is looking to map the upcoming EU taxonomy with comparable tools in China, Japan, Canada, the UK, France and the Netherlands.The EU taxonomy, which will have a preliminary draft launched next week, is expected to eventually become the basis of an EU Green Bond Standard. This has raised questions about whether the GBP will become obsolete in Europe over coming years. The general expectation, however, is that the GBP will remain a minimum standard, while the European Commission’s standard would be ‘best practice’.

“Transition bonds would help investors overcome the major challenge of providing capital not just to companies which are already green, but to those which have ambitions to become so” – Axa IM

Also in the green bond market this week, investment giant Axa Investment Managers is urging carbon-intensive companies to issue ‘transition bonds’, and has developed guidelines to help them do so.
The investor, which runs €730bn – of which it claims €463bn includes ESG integration – says the asset class “is at a crossroads”, prompting it to call for “a new type of bond that is required to help companies which are not yet green – and will therefore struggle to justify high quality and eligible for any ‘green taxonomy’ green bonds – to instead issue debt which is tied to them becoming greener businesses”.
“These transition bonds would help investors overcome the major challenge of providing capital not just to companies which are already green, but to those which have ambitions to become so,” the firm explained, adding that proceeds could be used to finance carbon capture storage, cogeneration plants and gas transport infrastructure, among other projects.
To spur the concept on, Axa IM has developed guidelines for issuers on how they can report, manage proceeds and address their broader sustainability strategies.
Speaking at RI Europe on Tuesday, Luis Cabra, Executive Managing Director of Technology Development, Resources and Sustainability of Spanish oil company Repsol, told the audience that the EU’s plans for a green taxonomy should be sensitive to the transition process – rather than capturing a strict ‘green’ economy. He pointed out that in order to meet the goal of the Paris Accord, conventional energy will be required, and this should be reflected in the list of eligible business activities.