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What different frameworks for green bond are used by different issuers?

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As per The Nordic Investment Bank, the Framework for Green Bond was established in 2014. The establishment has been framed in categories like energy efficiency, renewable energy, public transport solutions, transmission and distribution systems, waste management systems, wastewater treatment, and green buildings.

It also maintains that the high carbon infrastructure should be locked in and prevented in a long-term prospect. The projects related to energy efficiency are eligible only if they are operating at a reduced rate of at least 30%. Fossil fuels and heat-generating projects are strictly prohibited. To full fill, the requirement with EU green building, commercial and multi-family buildings are certified as per the LEED Platinum or BREEM Excellent.

As per a report issued by Sustainalytics, Renovate America Inc., from the US expanded its horizon into Green bond frameworks where it issued the green bonds and green notes via ABS platform known as Home Energy Renovation Opportunity Funding. The framework is classified with detailed analysis of projects which are eligible and criteria exclusively related to an individual product.

Banco De Comercio Exterior De Colombia (Bancoldex), the Colombian Bank, categorized the eligibility of the projects into five groups. (1) Preventing and mitigating negative effects of business activities on the environment by constructing, installing, and operating production control and system monitoring.

(2) Zero or low-emission transport by renewal, modernization, and modal shifts in the transport system. (3) Improving the productivity of the process by optimization of electric or thermal energy consumption. (4) Electric or thermal energy is generated via renewable energy sources, such as wind energy, solar energy, biogas from biomass waste, hydroelectric plants which are smaller with a lower capacity of 10MW, and geothermal energy. (5) Constructing and designing buildings fulfilling the construction parameter which are sustainable and as per the guidelines of saving water and energy. 

International Finance Corporation’s green bond framework permits projects which are climate-related loan portfolios whereas Asian Development Bank divided the eligibility categories into mitigation and adaptation. KfW’s renewable energy project is categorized as per the promotion for low-carbon transition and growth in climate-resilient. 

European Investment Bank (EIB) is in close collaboration with the People’s Bank of China (PBoC) and the China Green Finance Committee (CGFC) for attributing individual categories with policies in regard to the Green Bond Principles from Catalogs endorsed by the Chinese Green Bond Project. The collaboration uses the MDB-IFC common principles for tracking climate mitigation finance. 

EIB is also in collaboration with WWF and Institute for Climate Economics (ICE), providing a formal platform. The collaboration is working with external reviewers from the green bond community, performing the classification already formed on China Catalogs to jointly form the effective taxonomies that can be aligned for translating from one another. Through different collaborations, EIB is also trying to find out whether sectoral categories can be regrouped so that the level of details can be reduced. 

The African Development Bank also showed a promising interest in fostering green growth even though the proper guidance is scarce. 

Source:- Handbook of GreenFinance by Jeffrey D.Sachs, Green bonds, ifc.org, adb; green building, KFW

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