Twelve more banks join Green Bond Principles as NGOs issue credibility warning

Supporters reach 25 of world’s biggest banking names, while NGOs cautious

Twelve banks have added their support to the recently created Green Bond Principles, taking the total number of backing banks to 25 – as a group of prominent NGOs warned that supporters of the bonds must convincingly address the issue of what can really be considered ‘green’ or risk “setting the project up to fail”. The 12 new bank signatories to the Green Bond Principles are Barclays, BMO Financial Group, Credit Suisse AG, DNB, DZ BANK AG, ING, Lloyds Bank, Mitsubishi UFJ Securities, Nomura, RBC Capital Markets, Santander Global Banking & Markets, and Société Générale. In January, 13 of the biggest banks underwriting green bonds came out with the Green Bond Principles, voluntary guidelines that they said could help investors verify that the projects being financed in the fast growing $15bn+ market really are green. The banks said the guidelines would prompt issuers to designate, disclose, manage and report on the proceeds of green bonds. The International Capital Market Association (ICMA) is serving as Secretariat for the Principles. Its duties include facilitating information exchange with issuers, investors, underwriters, and other stakeholders, as well as gathering input for an annual update of the Green Bond Principles. However, in an open letter to the 13 founding banks of the Principles, NGOs BankTrack, Friends of the Earth US, Rainforest Action Network, International Rivers, Amigos da Terra -Amazonia Brasileira, Global Witness and Berne Declaration, cautiously welcomed the Principles, but said there was a “lack of clarity” over what projects could be considered green, which risked their credibility. The letter also called for banks to match their commitment to the green bond market by simultaneously curbing fossil fuel financing.
 BankTrack said the Principles should reference clear and science-based definitions and criteria of what constitutes ‘green’ and commit to third party, independent verification of the information and the use of proceeds reported by Green Bond issuers.
 Johan Frijns, BankTrack director, said: “Banks increasingly accept that climate change is a real and urgent problem, and initiatives like the Green Bonds Principles do represent small steps in the right direction. However they lack credibility when adopting banks continue to provide unabated support for fossil fuel extraction and coal power projects, which even development banks like the World Bank have said they will no longer touch. Furthermore, Principles which allow banks to decide for themselves what is and isn’t ‘green’ do not exactly inspire confidence. We’ll need to watch the implementation of these Principles carefully to see whether banks meet the expectations they have established here.”

Read the RI Editorial: Green bonds: it’s time to sort out the Guidelines from the Standards