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Are Green Bonds Really Making an Impact?

The SSC Team February 26, 2019 Tags: , , , , , Strategic Sustainability Consulting No comments
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Corporate green bonds, which are issued to fund climate-friendly projects, have grown incredibly since their inception in 2013. That year investors purchased $3 billion green bonds, but in 2017 that amount had sky rocketed to  $49 billion. A wide-range of companies issue these bonds including Apple, Unilever, and Bank of America and it doesn’t look like the trend will end.

 

But what are green bonds? And do they really contribute to creating positive results for the environment? A review analyzing the 217 corporate green bonds issued by public companies globally from January 1, 2013 to December 31, 2017, demonstrated that they are not only getting a positive reaction from the stock market, but also leading to improvements in financial and environmental performance, increased green innovations, and an increase in stock ownership by long-term and green investors.

The growth in the environmental performance of these companies as well as their increased green innovation is certainly encouraging.

Several measures suggest that after issuing green bonds, companies improved their environmental performance. When it came to the Thomson Reuters’ ASSET4 scale (based on more than 250 performance indicators like CO2 emissions, hazardous waste, and recycling), these green bond businesses environmental score rose by 6.1 percentage points. They also reduced their emissions by 17 tons of CO2 per $1 million of assets and increased their green innovations―measured by the ratio of the number of “green” patents filed to the total number of patents they filed in a given year― by 2.1 percentage points

All these positive response to such a relatively new innovation in impact investing shows that there is significant promise when it comes to fighting against climate change on a global scale. Big businesses are willing to step up and take the lead when it comes to making changes even if the government is not.

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