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The Green Bonds Principles, a new set of guidelines for issuers of green bonds signed by 13 commercial banks last January, need to be revised to include genuine commitments rather than broad recommendations, and must tackle the issue of what can and cannot be considered ‘green' head on, said the NGO network BankTrack in an open letter to the signatory banks published today.
The letter, co-signed by Friends of the Earth US, Rainforest Action Network, International Rivers,Amigos da Terra - Amazonia Brasileira, Global Witness and Berne Declaration, gave a cautious welcome to the release of the Principles, but stressed that the lack of clarity over what projects can be considered "green" risked setting the project up to fail. It also called for banks to match their commitment to growing the green bond market with an urgent move to curb fossil fuel financing in order to avoid dangerous climate change.
The Green Bonds Principles were signed by 13 investment banks, led by Bank of America Merrill Lynch, Citi, Crédit Agricole, HSBC and JP Morgan, earlier this year. They include recommendations for improving the transparency of the rapidly growing market for green bonds - which can include any bond designed to raise money for environmentally beneficial purposes.
BankTrack has called on the banks supporting this initiative to include real commitments to ensure high standards of transparency and disclosure for bond issuances they underwrite; reference clear and science-based definitions and criteria of what constitutes ‘green' under the Principles; and commit unambiguously to third party, independent verification of the information on sustainability and use of proceeds reported by Green Bond issuers.
"Banks increasingly accept that climate change is a real and urgent problem, and initiatives like the Green Bonds Principles do represent small steps in the right direction. However they lack credibility when adopting banks continue to provide unabated support for fossil fuel extraction and coal power projects, which even development banks like the World Bank have said they will no longer touch," said BankTrack director Johan Frijns.
"Furthermore, Principles which allow banks to decide for themselves what is and isn't ‘green' do not exactly inspire confidence. We'll need to watch the implementation of these Principles carefully to see whether banks meet the expectations they have established here".