Issuers exhibit strong organizational frameworks but differ on disclosure

Growth in green bonds continues across a diverse mix of issuers from a variety of sectors and regions. Of the 17 transactions we have assessed so far, all have received the highest overall score of GB1 (Excellent) under our Green Bonds Assessment (GBA) methodology. Differences have emerged across our five key criteria, however, with the greatest variation among issuers coming in reporting and disclosure commitments.

» Transactions score highly on organization, reflecting the essential nature of management oversight to the green bond issuance process. All but one of the assessed transactions to date have fully met our organizational assessment criteria on effective structure, polices, management expertise and external evaluations.

» 100% of green bond proceeds were allocated or will be allocated to projects in eligible green categories. Among assessed transactions, energy efficiency and renewable energy were the most popular eligible green categories of projects to be funded with green bond proceeds.

» Issuers are committing to robust disclosures on the use of proceeds. The form of green bond disclosures on use of proceeds varies significantly, but issuers have generally committed to reporting on how funds are allocated and, where possible, to disclosing qualitative and quantitative assessments of the environmental effects of their investments.

» Issuers of green bonds have comprehensive mechanisms and processes for managing proceeds.Management of proceeds is a key component of the green bond process because it assures investors that funds will ultimately go to their intended projects. Four of the 17 transactions achieved four of five subfactors for this criterion, while the rest achieved all five subfactors.

» Greatest variation among issuers comes in ongoing reporting and disclosure commitments. Many issuers have committed to disclose how proceeds are spent and what environmental impacts are expected over the life of the bond. Some issuers will report only until proceeds are fully disbursed. For some assessed green securitizations, including Property Assessed Clean Energy (PACE) securitizations, confidential information restricts certain aspects of ongoing reporting. As highlighted in a recent report from the Climate Bonds Initiative, the disparities in ongoing reporting practices among assessed transactions mirror the variety of reporting practices seen in the broader market.

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