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#SRI — 26.06.2018

Sustainable Development Goals, the New Framework for Green Bonds Reporting

On 14th June 2018, BNP Paribas Wealth Management attended the 4th Annual General Conference of the Green Bond Principles in Hong Kong, gathering more than 1,000 professionals from the international capital market.

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Among the key changes, a high-level of mapping to the Sustainable Development Goals is now required for each project eligible to the Green Bond Principles. The ICMA also provides guidelines to perform this mapping.

What are the Sustainable Development Goals?

The United Nations’ Sustainable Development Goals (SDGs) are 17 ambitious targets that call for urgent action to end extreme poverty, fight inequality and injustice and arrest climate change by 2030. Since their launch in 2015, they have been increasingly adopted by asset owners as a framework to measure the positive impact from their investments.

What are the Green Bond Principles?

Today, issuers, investors and underwriters of Green Bonds abide by the Green Bond Principles, the dominant reference for Green Bonds issuance. These Principles provide guidelines on the key components involved in launching a green bond and reporting to evaluate the environmental impact. They require following a clear process, key instructions being [1]:  

  1. to use the proceeds of the bond for Green Projects, with clear environmental benefits
  2. to clearly communicate the process of evaluation and selection of projects as “Green”
  3. to track the proceeds
  4. to annually  report on the use of proceeds

Thus, with the new SDG mapping required, each issuer will now have to communicate the use of proceeds and report their activities according to the SDGs

Why is this change important?

Asset owners have shown a keen interest in reporting their investments along the SDGs. Therefore, several institutions and entities have presented different approaches to frame the investment universe with the SDGs. With this new ICMA guideline, the various impact measurement proposals will be transformed into a unique and common framework, for the whole green bonds market. The reporting will now be consistent, systematic and available to every investor eager to know the exact impact of his investments. This also helps to strengthen the response of issuers to the question of the “Use of Proceeds”, the central pillar of Green Bond Principles.

SDG mapping at BNP Paribas Wealth Management

At BNP Paribas Wealth Management [2], within our Impact Investing approach, we are already mapping our Sustainable & Responsible Investments to the SDGs whenever possible, whether they are Equities, ETFs, Fixed-Income, Funds, or Managed Portfolios. Indeed, thanks to this mapping, we can  have products and offerings that can be aligned to the clients' own values and objectives, and respond to their high Impact Intention. We are adding a positive and measurable impact dimension to the traditional risk return analysis.

Risks associated with Green Bonds

Green bonds market generally lack liquidity due to its small market for now and tend to be more volatile than investments that diversify across different sectors and companies. Investment returns and principal value will fluctuate, and when redeemed before maturity, it may be worth more or less than the original investment amount. Investors should take into account their overall investment objectives, level of risk appetite, level of understanding of financial markets or products as well as the relevant charges and expenses before investing.

Discover how green bonds can help fight climate change.

Further information

View the ICMA guidelines for SDGs reporting.

Contact us if you are interested to find out more about our Sustainable and Responsible Investing offer.

[1] The Green Bond Principles 2018, ICMA

[2] BNP Paribas Wealth Management is the business line name for the Wealth Management activity conducted by BNP Paribas

 

Image: The Green Bond Principles logo by the ICMA & The Sustainable Development Goals logo by the United Nations