International standard-setting experts met this week to consider a set of global green bond standards, with a view to creating the world’s first internationally-endorsed standards for the asset class by 2020.
A Working Group convened by the International Standards Organisation (ISO) had meetings in the Netherlands to discuss draft documents that it has been developing since last year, seeking to provide a universal set of green bond standards.
ISO is the world’s official standards body, affiliated with the World Trade Organisation and the UN’s Economic and Social Council. It represents more than 160 national standards bodies, covering more than 21,000 global standards from health & safety and photography, to ship building and equipment specs.
The Green Bond Standards are being led by the American National Standards Institute, in collaboration with the Climate Bonds Initiative and green bonds verifier NSF. Other members of the group are confidential, but include “a number of countries and liaisons”, according to a spokesperson. RI understands members come from across the US, Asia, Australia and Europe.
In four days of meetings this week, the Working Group were to review four draft sections of the standard – all unavailable to the public.
“At least two of the parts will be voted on as a Draft International Standard after this meeting,” said the spokesperson. ISO generally works to a three-year timeframe, so the final version is expected around the middle of 2020.
The green bond ‘standard’ is in fact made up of four standards, covering: 1) Process 2) Taxonomy 3) Verification 4) Green loans.
But since ISO set the Working Group up last year, the European Commission has stolen much of the limelight, pursuing its own set of green bond standards at a faster pace than ISO.
The Commission’s Technical Expert Group (TEG), appointed earlier this year, is split into four sub-groups – one of which is dedicated to green bond standards.Like the ISO Working Group, the TEG met this week to discuss developments. A consultation on its approach to the green taxonomy – which will form one of the key pillars of the green bond standards – will be launched by the end of the month. A first draft of the taxonomy is expected next year, covering eligible climate mitigation and adaptation projects.
As well as considering what is ‘green’, the EU’s green bond standards are also expected to address governance issues such as how to verify transactions and how to report on the allocation of proceeds.
The spokesperson for ISO confirmed that members of its Working Group met with representatives from the Commission this week to discuss the relationship between the two initiatives.
“A representative has [also] agreed to serve as a liaison,” she confirmed, having taking part in yesterday’s ISO meeting. “So there is good communication between the committees for this work.”
However, some experts close to the matter have suggested to RI that the “best route” for ISO will be to follow the EU’s lead and adopt its taxonomy and green bond standards, which are expected to be developed ahead of ISO’s.
“The work involved in standards in this area is massive and beyond the resources of the small ISO group,” said the person. Another specialist at an NGO agreed that it would be “most suitable” for the ISO standards to be based on the EU’s, saying that – of all the global green bond guidelines – the EU’s would “carry the most weight”.
A member of the ISO Working Group described this assumption as “absolutely incorrect”, pointing out that “the European voice is big, but quite regional, [whereas] ISO is international.”
“How we could cooperate with each other is one of the issues which we should solve, but at the moment, both teams have worked separately,” the expert explained, adding: “At some stage, the EU would join the ISO process, bringing their own draft proposal – otherwise their standards will remain only European.”