Britain starts building 'guard rails' for green bonds
Reuters
Published Jun 28, 2022 07:14PM ET
Updated Jun 28, 2022 08:26PM ET
By Huw Jones
LONDON (Reuters) - Issuers of bonds that raise cash for "green" projects should voluntarily apply industry standards to avoid hoodwinking investors, Britain's Financial Conduct Authority (FCA) said on Wednesday.
Bonds whose proceeds are used to finance sustainable activity passed the $1 trillion mark globally last year for the first time, the FCA said in a policy statement on integrating environment, social and governance (ESG) issues into UK capital markets.
Regulators globally are looking at how to limit "greenwashing", or giving investors a flattering picture of sustainability as ESG funds attract trillions of dollars.
Green bond issuance in Britain, including government 'gilts', totalled $53.5 billion last year, the largest market in Europe for the first time, the FCA said.
"We are taking a measured approach to ESG-labelled debt instruments, with the aim of setting clear guard-rails as the market continues to develop."
Issuers should consider voluntarily applying industry standards such as principles https://www.icmagroup.org/sustainable-finance on green debt from the International Capital Market Association, a bond industry body.
There was no consensus on whether Britain should adopt a national "green bond standard" along the lines of norms being approved in the European Union, the FCA said.
Misleading advertisements for green bonds will face enforcement action, the FCA added.
The watchdog said it may consider regulating "second party opinion" (SPO) firms like Sustainalytics, Vigeo Eiris and ISS ESG used to assure investors that a bond is aligned to green principles.
"Given the increasing importance of external reviews in the ESG‑labelled bond market, respondents supported some form of regulatory oversight of SPO providers and verifiers," it said.
There is also a "clear rationale" for oversight of unregulated ESG data and ratings providers, which are widely used by asset managers to help them select investments for funds that tout green credentials, the FCA said.
"If the Treasury extends our regulatory perimeter, we will take the necessary steps to develop and consult on a proportionate and effective regulatory regime," the FCA said.
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.