Building accountability into green bonds
MIS believes there is a possibility that issuance of green bonds — which are fixed-income securities that raise capital for projects or activities with specific climate or environmental sustainability purposes — could surpass $250 billion this year, an increase of more than 60% from 2017. As investor demand for sustainable investments grows, so too does the need for accountability mechanisms like MIS’ Green Bond Assessments (GBAs). GBAs represent a forward-looking opinion on the relative effectiveness of an issuer’s approach to managing, administering, reporting on and allocating assets to environmental projects financed by proceeds from green bond offerings.
In 2017, we brought our GBAs to new regions. When government officials in Nigeria issued the first-ever sovereign green bond in Africa, our GBA team provided a grade of GB1 (Excellent) on the five-point scale, supplying investors with much-needed information about the offering. Proceeds from the ₦10.69 billion ($29.7 million) issuance will help finance renewable energy and afforestation projects throughout Nigeria.
In South Africa, as Cape Town coped with its worst drought on record, the city issued an R1 billion ($74 million) green bond to fund water conservation and infrastructure improvements. Again, Moody’s GBA provided a lens through which investors could assess the green credentials of the offering so that investors and the city could see a path forward.
By building greater transparency and credibility around environmental projects, GBAs equip investors with a tool to more confidently fund the building blocks of a more sustainable future.