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ESG round-up: Industry green bond standards updated

The Green Bond Principles have been updated in a bid to clarify and strengthen the voluntary industry standards that govern the small but growing market.

The changes were announced in conjunction with an annual general meeting of the Green Bond Principles (GBP) in Paris today. The principles are managed by the International Capital Market Association (ICMA).

According to a statement from ICMA, the changes to the principles included updated “project and traceability language” to facilitate more issuance, especially from sovereigns and corporates, and stronger guidance on issuer communication of environmental strategy and management of material environmental and social risk factors.

Other changes included “expanded and additional definitions of green categories and new impact reporting metrics”.

The 2017 edition of the GBP said additional guidance had been provided on impact reporting, with suggested metrics for sustainable water and wastewater projects.

Manuel Lewin, head of responsible investment at Zurich Insurance, said: “The 2017 update to the GBP encourages issuers to provide information about their green projects in the context of their broader sustainability strategy and processes, establishing a critical link between the dedicated use of proceeds unique to green bonds, and the relevance of sustainability practices in the assessment of credit risk.”

Commenting before the updates to the principles were announced, Bram Bos, senior portfolio manager for sustainable credits and green bonds at NN Investment Partners, said issuers should be encouraged to include quantitative key performance indicators (KPIs) in their annual reports.

This transparency would appeal to investors as it would allow them to properly assess the impact the bonds had on the environment, he said.

“Green bonds have a direct and measurable impact on the environment,” he added. “A lot of investors in green bonds want to know what exactly that impact is.” 

According to the 2017 GBP document, the principles “recommend the use of qualitative performance indicators and, where feasible, quantitative performance measures (eg energy capacity, electricity generation, greenhouse gas emissions reduced/avoided, number of people provided with access to clean power, decrease in water use, reduction in the number of cars required, etc), and disclosure of the key underlying methodology and/or assumptions used in the quantitative determination”.

“Issuers with the ability to monitor achieved impacts are encouraged to include those in their regular reporting,” the principles said. 

In addition to the revisions to the GBP, new Social Bond Principles were released for bonds raising funds for projects with positive social outcomes, such as affordable housing. New Sustainability Bond Guidelines were published to provide guidance for bonds combining green and social projects.

Japan’s GPIF pushes proxy voting disclosure 

The world’s largest asset owner has told its external asset managers to disclose records for the shareholder votes they exercise on its behalf.

In a letter from 8 June, Japan’s ¥145trn (€1.24trn) Government Pension Investment Fund (GPIF) said the proxy voting records should be disclosed for each investee company on an individual agenda item basis.

Asset managers should do this on behalf of all clients, including GPIF, it said.

The request is in line with a principle that was added to Japan’s Stewardship Code when it was revised last month.

Norihiro Takahashi, GPIF president, said disclosure of the details of proxy voting records was essential for institutional investors to fulfil their own stewardship responsibilities and “deepen Corporate Governance reform and move its focus from ‘form’ to ‘substance’”.

“GPIF shall continue to enhance the mid- to long-term investment returns for our beneficiaries through improvement of corporate value and fostering sustainable growth of investee companies,” he added.

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