The number of shades that socially responsible bonds come in is turning into a spectrum. Issuers make it confusing enough with myriad names for their own programmes but the addition of transition bonds adds further complication.
While all these labels are tied to different frameworks and target specific areas of greenness, they are all in essence simply following the International Capital Market Association’s Green Bond Principles.
There is evidence that this particular way of marketing bonds is starting to run away from the very people all this effort is aimed at — the investors.
Take the European Bank for Reconstruction and Development’s new green transition bond for example, which came to the market last week. The bond failed to reach full subscription with the order book finishing below the €500m sold.
The EBRD was candid in explaining the result to GlobalCapital. “We went out on screens so late in the day and it didn’t give people enough time to go through the framework,” its head of funding said.
This shows there are just too many different types of socially responsible debt and adding more just adds to the burden on investors as they dig through each new framework.
The EBRD’s green transition bond is its third type of green bond, coming in addition to its vanilla green bonds and recently launched climate resilience bonds.
Under the GBPs, the definition of a green bond is wide ranging and encompasses areas of climate change mitigation and adaptation and natural resource conservation.
All else is marketing; and, increasingly, baffling.
